Good day and thank you for standing by and welcome to the Opendoor Third Quarter 2021 Earnings Conference Call. At this time, all participants on a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. . Please be advised that today's conference is being recorded. . I would now like to hand the conference over to your host today, Elise Wang. Please go ahead.

Thank you and good afternoon. Full details of our results and additional management commentary are available in our earnings release and shareholder letter, which can be found on the Investor Relations section of our website at www.investor. Opendoor.com Please note that this call will be simultaneously webcast on the Investor Relations section of the Company's corporate website. Before we start, I would like to remind you that the following discussion contains forward-looking statements within the meaning of the federal securities laws, including but not limited to, statements regarding Opendoor's future financial results and management's expectations and plans for the business. These statements are neither promises nor guarantees and involve risks and uncertainties that, may cause actual results to differ materially from those discussed here. Additional information that could cause actual results to differ from forward-looking statements can be found in the Risk Factors section of Opendoor 's Annual Report on Form 10-K for the year end of December 31, 2020, and Opendoor 's other periodic SEC filings, including the quarterly report on Form 10-Q for the period ended September 30, 2021, to be filed with the SEC. Any forward-looking statements made in this conference call, including responses to your questions, are based on current expectations as of today, and Opendoor assumes no obligation to update or revise them, whether as a result of new developments or otherwise, except as required by law. The following discussion may contain non-GAAP financial measures. For a reconciliation of each of these non-GAAP financial measures to the most directly comparable GAAP metric, please see our website at investor.opendoor.com. I will now turn the call over to Eric Wu, Co-Founder and Chief Executive Officer.

Good afternoon and thank you for joining us today. I'm excited to share our third quarter results alongside Carrie Wheeler, our Chief Financial Officer and Andrew Low Ah Kee, our President. Aligning with our first core value, which is to start and end with the customer. I want to ground us at our work with a recent customer story. You'll hear from Tyler Botma, who sold his home and bought a home completely with Opendoor while fulfilling a childhood dream.

Hi, I'm Tyler Botma, I live in Litchfield Park, Arizona and I bought and sold my house through Opendoor. The big reason why we wanted to move was, one we wanted to fund the dream home and probably most importantly, was getting to a location that, had really high marks for education for our son. We first started the process, a lot of the apprehension we had was trying to locate ideal or specific home that we wanted, also selling the home. We've sold conventionally and bought conventionally prior, and going through that process and then going through Opendoor 's process. I don't -- I really couldn't put a value to how much easier that process was. What they made possible for us was, essentially getting us a life that we didn't think was possible. Being able to sell a home that, we weren't quite sure you'd get what we want or even if the sale would go through and to be able to buy a home, move in to our dream neighborhood and dream house. The Opendoor experience, I'd say probably just in one word is easy. We often cite externally that 2/3 of sellers are also buyers. But we've really detailed the complexity and timing of managing 2 transactions while balancing the realities of life. And these realities include the forming of a new family, the pressures of work, the hardship of a pandemic, the death of a family member, or the drive for a better school district. This is why our work matters. Our vision, which has remained the same since starting Opendoor, is to make it possible to buy, sell, and move at the tap of the button.

We know the end-state for the real estate marketplace will be a simple, certain and fast transaction powered by technology. It's not a matter of if, but when. So we've been heads-down building this future experience piece by piece with the consumer in mind at every step. Our third quarter results are a byproduct of this focus, exceeding our expectations on the top line and bottom line. We generated $2.3 billion of revenue, acquired over 15,000 homes, delivered over a $170 million of contribution profit, and generated $35 million of adjusted EBITDA. While we are clear on our vision and strategy, the foundation of our performance has been and will continue to be, our team and execution. In terms of our team, we've added substantial talent this past quarter. In addition to expanding our pool of executives across pricing, engineering, product, operations, and people teams, we've made 3 acquisitions. We acquired Pro.com and Skylight, 2 seasoned really special teams that are spent years combining logistics and technology to build digital consumer experiences to upgrade a home. This will in turn strengthen our ability to continue to scale our home operations. We also acquired reddoor.com, a digital home financing products, which makes it possible to get pre -qualified for a mortgage in less than 60 seconds with an elegant mobile experience. We're excited to welcome our new teammates to Opendoor, as we build out the next evolution of our products. In terms of our execution, we're continuing on our journey of driving existing market growth, expanding nationwide and building an end-to-end digital experience. With an existing market growth in Q3, we saw material gains in the adoption of Opendoor growing acquisitions by 79% and resales by 72% quarter-on-quarter. This was driven by rising consumer awareness and expanded buy box coverage, which…

Thanks, Eric. As Eric said, Q3 was another strong quarter for Opendoor. We purchased 15,181 homes, up 79% versus Q2. This growth was driven by our superior value proposition and robust operational capabilities, which led to record levels of offers and record real seller conversion. Buybacks expansion provided strong tailwind of more than 45% of the homes acquired in Q3, coming from our expanded buybacks to the end of 2019. In addition, our brand-building efforts and Lifecycle Marketing delivered stronger than anticipated growth. On the reseller front, we sold 5,988 homes, up 72% versus Q2 and generated revenue of nearly $2.3 billion up 91% quarter-over-quarter. We exceeded the high-end of our guidance primarily due to unit volumes driven by strong home acquisition growth and the overall strength of demand for homes, which led to a faster sell-through rate than we'd anticipated. Home price appreciation, and bought price-related Buy-Box gains were also tailwinds to revenue, driving a sequential increase in revenue per home sold of 11%. Our adjusted gross profit margin was 10.3% and our contribution margin was 7.5% in Q3. These compared to 13.5% and 10.8%, respectively in Q2. This sequential moderation is in line with our expectation and our prior guidance. As a reminder, we believe we can sustainably deliver mid-single-digit contribution margins of approximately 4% to 6%, on annual basis, given our cost structure and the strength of our pricing and operational capabilities. In Q1 and Q2, our margins outperformed these levels for 2 primary reasons. 1. As we exited 2020, with very low inventory levels, our resale mix was heavily over-index to recently acquired homes, and 2. We're deliberately a bit conservative and how much HPA we embedded into our pricing in the early part of the year, particularly as HPA accelerated throughout Q1. We saw both…

And thank you. And we please ask that, you limit yourself to one question. And our first question comes from Nick Jones from Citi. Your line is now open.

Great, thanks for taking my questions. I guess, maybe 2. One, can you touch on housing pricing volatility, and how you feel your model is positioned to withstand that and detected given the turnover. And then if, let's say its prices do compress a little bit, how much contribution margin compression can we expect? And how much can a model withstand, given some of the other headlines and iBuying over the last two weeks? Thanks.

Thanks, Nick. Let me -- before I pass to Carrie to talk about the price -- housing price volatility question and the compression of contribution margin question, I just want to re-emphasize that we're in a generational shift in housing from offline to online. And we understand empirically the consumers love our products, and we have very strong stable unit economics. Let me pass to Carrie to talk about the 2 questions you had.

Thanks, Eric. Hey, Nick. In that in your question is, how do we price for homes, and how do we think about forecasting? A couple of comments. 1. we're very good at this. This is core to what we do. We have built over the last 7 years, very robust pricing systems. We have 7 years of investment in the data, in the modeling, and in our team that allows us to continuously improve how we model and approach home price valuations. We operate our business with entire discipline, as Eric said, we are rigorously back testing our models every day, they're highly responsive, they have fast feedback loops, and we can react to changing market conditions. Our forecasting accuracy was what allows us to manage the business within a reasonable range of outcomes and deliver margin s with the net 4% to 6% contribution margin range that we've guided you. Ultimately, the proof of our ability to do that, is in our results. I just want to mention again, Q4 will mark our 20th consecutive quarter of positive CM. So that's housing in -- the housing and forecasting question in total. And the part two of your question was around contribution margins and how they may fluctuate with changes in HPA. Important is that, our model really works in up-market, it's going to work in flat market, it's going to work in down-markets. We've talked about this before, but we are a market-maker like, define that, that means we provided liquidity in our customers, we're pricing a certainty, and we're taking a spread, we're getting paid for that. And we're managing our business to that 4% to 6% range I just indicated. If HPA were to go down, we would look to fluctuate, increase our spreads to manage to that target margin range. So I would not marry HPA trend and contribution margin trends together. We're driving for consistency within that range of outcomes.

Great. Maybe I could ask a follow-up just around pricing models. I think there's a lot of available data to a lot of people to try to -- real estate agents do this, they'll have a ton of data. Is there an angle to how the data structured and deployed that we need to think more about in terms of a competitive mode? Thanks.

It's a good question, Nick, and it's something that we treated proprietary and a large competitive moat that compounds as we get to scale over time. And so I would just say that since we started Opendoor, this has been core and foundational to the business. And we've invested time, energy in the team, the data pipelines, housing about feedback loops across multiple vectors of pricing to be in the position where we are in today. And so I'm not going to speak to the specifics, but it is a very big investment area for the Company.

Great. Thanks for taking the questions.

Thank you.

And thank you. And our next question comes from Jason Helfstein from Oppenheimer. Your line is now open.

Thanks. I'm going to ask to, how much of the 11% quarter-to-quarter increase in revenue per home was a byproduct of the buybacks expansion versus home price appreciation? And then second, with Zillow exiting, how do you think this impact marketing efficiency -- your marketing efficiency or no impact or just general thoughts there? Thanks.

Hey Jason. The 11% increase in revenue per home, really a mix of I'd say, price-related buybacks expansion, and some just market appreciation, we don't break those 2 things out specifically, but I would say it's a good mix above. More weighted to the buyback side.

To the second part of the question, I would just say that, the value proposition is resonating. And it's resonated before Zillow within the category, and it will continue to resonate, as we expand nationwide and drive deepening market share within our existing cities. In fact, we see the ops to happening is, as we get to scale within cities, our marketing becomes quite efficient.

Thank you.

And thank you. And our next question comes from Ygal Arounian from Wedbush Securities. Your line is now open.

Hey, good afternoon guys. One of the things that came up over the past couple of weeks with what's happened in our bank's business has been on the presence side. The other thing that's come up is on operational side, you touched on it in the comments and in investor letter. Can you maybe expound on Scout a little bit how it drives benefits and helps you scale more efficiently? You mentioned, I think, when you guys first re-known public, 10,000 contractors in the app, can you update that number? And then maybe talk a little bit about how the acquisitions can integrate with Scout and help you improve your scalability on the operational side.

Hey, Ygal, it's Andrew here. Happy to speak to that. We did see acquisition demand significantly outpace our own expectation beginning early in Q3, and we took steps to proactively manage the overall system balance. It's really a good reflection of the integrated system we run here at Opendoor. You mentioned Scout and our ability to absorb that 80% quarter-over, quarter increase in our acquisition volume really highlighted 7 years of investment, not just in Scout, but in our technology and operations platform, more broadly. Capabilities like centralization, the ability to take calls from across our 44 market footprints in one location, or virtualization, we've alluded new things for customers or employees or vendors to do things by video instead of in-person. Or self-serve, which lets a customer do things and take actions on their own timeline, when it most convenient for them without ever involving a person. Those are capabilities that, don't happen overnight. It's those investments actually that led us flex up so rapidly and so quickly, even while maintaining the customer experience too and incredibly high standard.

Okay, that's really helpful. And then I guess in all that's happening a little bit lost in the shortfalls was something that usually gets a little bit more attention is, just on the ancillary services. Any update on that in general and open back offers? And then how Opendoor Complete can -- or how you expect Opendoor Complete to pile that together and potentially drive better attraction in coming quarters? Thank you.

Sure thing. Last quarter, we shared then we hit that $1 billion GMV milestone on Opendoor back offers, and that really was about product markets that our Opendoor back offers were helping customers be more successful in winning their next home. Right now we're focused on scalability, making sure our tech and offs platforms for our services are ready to scale. Further comments on our core business. We know that those upfront investments are critical to delivering great experiences over time, and we're focused on investing there. We continue to make progress as you called out, we launched Opendoor complete last week, which helps the nearly 2/3 of sellers who are also buying have certainty on their sale and the equity in our home have the power of an Opendoor back to offer to win their next home, and the convenience of lining up all the dates. All the power of Opendoor's innovation in one seamless offering. We also announced the acquisition of RedDoor, a fully digital mortgage brokerage that delivers a truly delightful customer experience. Eric mentioned in the prepared remarks, a buyer can go from app install to pre - qual in less than 60 seconds. We're focused on getting the integration and licensing done and look forward to rolling that out, in the early part of next year. Overall, we're seeing strong signs that the end-to-end digital experience is what our customers crave. And we're confident that our strategy and execution will deliver for years to come.

Appreciate the answers. Thank you.

Thank you. And our next question comes from Stephen Ju, from Credit Suisse. Your line is now open.

All right, thank you so much. I'm sorry if this was covered a little bit earlier, but can you talk about your level of inventory build up this quarter? Should we be thinking that the traditional holding period of around 90 to 100 days, maybe elongating a bit here so you can give yourself a little bit more time to refurbish given the labor constraints or is there another operational factor that's going into a decision here, and I guess there's probably nuances for each market. But are you finding that the timeline to launch each subsequent city or market is coming down as you get more practice? And at this point, how much prep work or timeline does it really take to go into each new market? Okay, thanks.

Hey Stephen, this is Carrie. New on this touch base, a little bit on inventory help note. Andrew, speak to the last part of your question. Yes, inventory grew a lot, in the last quarter. That's a function of us growing, such good thing. And we feel good about what we own right now in the pace of our resale. Our resale pace is going to be slower or faster, depending on the market environment we're in. And certainly time of the year, is one consideration there. You, people don't love moving during the holidays. So Q4 may be slower, Q1 a little bit faster,

etc. We factor our resale expectations into how we price and how we manage our inventory. And I'd say that Q4 reflects that resale pace and where we're at right now against what continues to be a very healthy housing market. Nothing fundamentally has changed really about a holding period, but I'll ask Andrew to comment on the latter part of your question.

Sure, and I think two parts in there. The first around holding periods. Overall, we did, as I mentioned, take steps to proactively manage the overall system period -- the system balance because that holding period is elongated. We're confident that the supply will be balanced with our demand outlook across the vast majority of our 44 market footprint by the end of the year. Now, certainly we see some of the labor constraints that are so prevalent across the country right now, but it's really important to call out that homes we buy are generally in good conditions. We typically do small jobs like repairs, so getting a home resale ready doesn't require specialty labor. So we feel good about our ability to have that system completely?in balance? but by the end of this year. And then I think you also had a question in there around the time to launch additional cities. Look, we've more than doubled our market footprint. We started the year with 21 markets, we're now in 44, that 23 market increase is really a testament to our team's execution and the refinement of the playbook that we've made. You saw us actually not only launch 23 markets year-to-date, but you saw us launch 6 markets in a single day, and that's a function of the time and investment in centralizing team so that we could launch and scale more quickly. And the team has -- continues to be hard at work to expand our footprint nationwide, so we feel good about our playbook's there.

Thank you.

And thank you. And our next question comes from Michael Ling (ph) from Goldman Sachs, your line is now open.

Hey, good afternoon. This is Adam Hodge on for Mike. Thanks for taking the questions. I have 2. First, you mentioned the record real seller conversion, which I think, given the bidding wars in the market and high velocity of homes going through the traditional process seems to be quite impressive. Could you give us a sense for what dynamics do you think are driving this in the quarter? And then second, with the 45% of acquisitions you mentioned coming from the expanded buybacks since 2019, could you give us a sense of how much of that is new markets versus the expansion of the buybacks and some of your other core markets? I guess it would just be good to get a sense of how quickly you ramped the buybacks in more heterogeneous markets as you launch them and what gives you the confidence there. Thanks so much.

Yes, appreciate the question Adam. Like you mentioned, we're seeing record highs in 2 vectors, which is offer requests and then real seller conversion. And what I can highlight is that, we're working -- we happen and continue to focus on 3 vectors to drive conversion, which is simplicity is turning team speed. The last factor that we've started to focus on is, really trust. And we see that, aggregate debt in markets where amount takes over and then MPS is north of 80. And that helps to drive additional conversion and offer awareness. To the second part of question, I'll pass it to Carrie to talk about the market -- the buybacks extension.

Yeah, I'm happy too. So 45% increase in buybacks we've seen since the 2019 time period, the vast majority of that is driven by what's in our existing markets. It's just expanding the surface area we can cover with any given market, whether that's home type or price or age and what have you, it's really mostly driven by existing market side.

And thank you. And our next question comes from Edward Yruma from KeyBanc Capital Markets. Your line is now open.

Hi, this is Abbie Zvejnieks on for Ed. So I know that penetration of iBuying is still low. But do you believe that sellers were cross-shopping different iBuyer s, and then if so, have you seen any localized pricing changes due to the exit of Zillow? And then a second part to the question, it seems like the buybacks has extended to higher-value homes. But are you also open to older housing stock or homes that require apparent remodel?

I appreciate the questions. The first part of question was how we observed cross-shopping, and iBuying, and what is the impact of less competition. I think what we've seen is that if we can meet customer expectations and deliver again on a simple, certain, and fast transaction, that people will say yes to Opendoor. And while there are cases where people are cross-shopping, we're investing heavily in the experience, our offers capabilities to lower the costs in our pricing accuracy to win the trust of our customers. Again, conversion is north of 35%. The cross-shopping hasn't at all impaired our ability to grow, and in fact, there's in our perspective too much demand for our product. And on your question around buybacks changes, and Carrie mentioned, that's really expanding our coverage of homes than we can offer on. We want to delight more customers with the experiences we offer. And that could be any number of dimensions that drive that expansion. It could be an older home, it could be the home price, it could be a little bit around home condition, it could be take your pick of the long list of different attributes that drive that expansion. Our team has been really good about finding those opportunities, where we weren't -- where we were not making offers to customers and expanding our offerings through them while making sure that we felt really good about the pricing accuracy and our ability to forecast.

Great. Thank you.

And thank you. Our next question comes from Ryan McKeveny, from Zelman and Associates. Your line is now open.

Hey, Eric and Carrie congrats on the results and thanks for taking the question. So obviously, inventory risk management is clearly top of mind here, and Carrie you mentioned risk management in the DNA of the Company, so at the end of the day obviously we can see the results in terms of the unit margins obviously remaining good. The inventory valuation impairment staying very modest relative to the size of the inventory, so to ask what would several of my colleagues on the call have asked, but a bit different way. Part of it clearly relates to the pricing accuracy at the start but then there's also managing things once it's an inventory, managing that resale pace. Can you talk about your philosophy around, whether it's managing cohorts based on geography or time and inventory, and ultimately just thinking about that tailor risk of the portfolio and how you think about managing that to avoid the situation where you get caught with some inventory that's maybe not selling for where you thought it would? Just general thoughts on the risk management side would be helpful.

Sure. I'm happy to give you some more color on that. As you said and you highlighted our remarks, it really is part of our DNA. We spend as much time on the risk management side as we do thinking about the acquisition side, obviously those 2 things are paired together. We're constantly looking at cohort performance and making sure that they are performing in line with where we expected. We hold our own feet to fire on that every day. We're not just looking at geographies, Ryan, but we're looking at home segment, on price segments. You name it to understand, relative to the expectations we had, how are they performing over time? And that feeds into our ability to forecast and manage to the margin ranges we have. We have a big team, a very smart people, who spent all their time in this topic of pricing and investment lead by our Chief Investment Officer. But the ownership for risk and the risk management system's really extend beyond that. It's core to not just the pricing team. Our off team, held accountable for managing homes and risk. Our finance team thinks about, certainly Capital Markets. We meet regularly on topic of risk management at the very senior levels of the Opendoor management team, and then down from there. It's really core to what we do, and it's just part of our daily operating cadence, it has to be.

That's helpful Carrie. Thank you. Second question so on the labor of material side of things for renovation. So obviously whether it's homebuilders, whether it's renovators, there are constraints and makes sense to call out the Opendoor Scout platform. I guess to take it a step further and think a bit big picture as opposed to the near-term, the acquisitions of Pro.com and Skylight, should we think of those as platforms that can get you guys over the long term into things like customizations, upgrades, options, that a customer could actually come in digitally and start customizing some things and become, in theory, an added income stream over time? Maybe just some commentary on Pro.com and Skylight and how that ties in. Thank you.

Yeah, it's a good question and a good idea. I've known the founder of the Pro and Skylight for years. And in my perspective, it's rare to find teams that understand the complexity and have the expertise to combine logistics and technology. And that's why we acquired these companies. These teams are passionate about solving consumer problems in housing. They have technology capabilities that can pull forward our road map, and they're going to be working on helping us scale Opendoor. The second part of your question is, do we want to apply these capabilities in the future to help consumers personalize homes and add revenue streams? It's something that we dream about and something that we will put into motion once we feel comfortable with our operational scale. And then lastly, more importantly, that we can deliver on a fantastic consumer experience in that category. Adding something that we can do in the future.

Thanks, Eric.

And thank you. And I'm showing no further questions. I would now like to turn the call back over to Eric Wu for closing remarks.

I just want to spend a second to thank our teammates here at Opendoor that put in the hard work when no one is looking to delight our customers. These results are a byproduct of that hard work and the teammates around the table that spending their nights and weekends helping our customers. Thank you.

Thank you. This concludes today's conference call. Thank you for participating, you may now disconnect.