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What changed in Offerpad Solutions Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Offerpad Solutions Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+437 added−458 removedSource: 10-K (2024-02-27) vs 10-K (2023-02-28)

Top changes in Offerpad Solutions Inc.'s 2023 10-K

437 paragraphs added · 458 removed · 340 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

63 edited+15 added−12 removed49 unchanged
Biggest changeCustomers also have the ability to utilize Offerpad’s renovation advance program to complete strategic upgrades to maximize the resale value of the home. • Offerpad Home Loans (“OPHL”) : We provide access to mortgage services through our in-house mortgage solution, OPHL, or through a third-party lending partner. • Bundle Rewards : The Offerpad Bundle Rewards program allows customers to receive multiple discounts when selling and buying a home with Offerpad, and by obtaining their home loan with OPHL. • Title and Escrow : To deliver title and escrow closing services, we have a national relationship with a leading title and escrow company, through which we are able to leverage our size and scale to provide exceptional service with favorable economics.
Biggest changeBelow is a summary of our current ancillary products and services: • Title and Escrow : We have a national relationship with a leading title and escrow company through which we are able to leverage our size and scale to provide exceptional title and escrow closing services with favorable economics. • Offerpad Home Loans (“OPHL”) : We provide access to mortgage services through our in-house mortgage solution, OPHL, or through a third-party lending partner. • Bundle Rewards : The Offerpad Bundle Rewards program allows customers to receive multiple discounts when selling and buying a home with Offerpad, and by obtaining their home loan with OPHL.
We also offer seamless, integrated access to in-house agents to advise on the purchase of a home as well as access to mortgage services through our in-house mortgage solution, Offerpad Home Loans, or through a third-party lending partner.
We also offer seamless, integrated access to partner agents to advise on the purchase of a home as well as access to mortgage services through our in-house mortgage solution, Offerpad Home Loans, or through a third-party lending partner.
Separately, through a variety of ancillary service opportunities we believe we will be able to further expand our total addressable market. Vertical integration and product innovation will provide future potential opportunities including expansion of our mortgage and title solutions, as well as entry into other transaction services such as home warranty, homeowners insurance, or remodeling services.
Separately, through a variety of ancillary product and service opportunities, we believe we will be able to further expand our total addressable market. Vertical integration and product innovation will provide future potential opportunities including expansion of our mortgage and title solutions, as well as entry into other transaction services such as home warranty, homeowners insurance, or remodeling services.
Our financial results, including revenue, margins, inventory, and financing costs, have historically had seasonal characteristics generally consistent with the residential real estate market, a trend we expect to continue in the future. Corporate History and Background Offerpad Solutions Inc. was formed on September 1, 2021 through a business combination (the “Business Combination”) with Supernova Partners Acquisition Company, Inc. (“Supernova”).
Our financial results, including revenue, margins, real estate inventory, and financing costs, have historically had seasonal characteristics generally consistent with the residential real estate market, a trend we expect to continue in the future. Corporate History and Background Offerpad Solutions Inc. was formed on September 1, 2021 through a business combination (the “Business Combination”) with Supernova Partners Acquisition Company, Inc.
In connection with our Flex listing service offering and through our Solutions Center, prospective buyers have access to our Offerpad Solutions Experts, in-house agents who can advise on the purchase of their home, and our ability to provide access to mortgage services through our in-house mortgage solution or through a third-party lending partner, which streamlines the home loan process for our customers.
In connection with our listing service offering and through our Solutions Center, prospective buyers have access to our Offerpad Solutions Experts, partner agents who can advise on the purchase of their home, and our ability to provide access to mortgage services through our in-house mortgage solution or through a third-party lending partner, which streamlines the home loan process for our customers.
Grow Offerpad Flex Listing Service Offering While our Flex listing service offering has already enabled many customers to conveniently list with us with the confidence that they can typically take advantage of a backup cash offer, we plan to further increase awareness of this service through more product centric marketing.
Grow Offerpad listing service offering While our listing service offering has already enabled many customers to conveniently list with us with the confidence that they can typically take advantage of a backup cash offer, we plan to further increase awareness of this service through more product centric marketing.
The frictionless experience our customers encounter when buying and selling their homes drives customer interest in ancillary services, which provides significant further opportunities for bundling services and enhances our ability to capture additional market share.
The frictionless experience our customers encounter when buying and selling their homes drives customer interest in ancillary products and services, which provides significant further opportunities for bundling services and enhances our ability to capture additional market share.
If a customer sells a home directly to a buyer using our Flex listing service, we earn a service fee, typically as a percent of the sales price of the home.
If a customer sells a home directly to a buyer using our listing service, we earn a service fee, typically as a percent of the sales price of the home.
Through our Offerpad Express cash offer service, customers complete a few simple steps and receive a competitive cash offer on their home within 24 hours.
Through our Offerpad cash offer service, customers complete a few simple steps and receive a competitive cash offer on their home within 24 hours.
Certain licensed entities also are subject to routine examination and monitoring by the CFPB (for mortgages) and/or state licensing authorities. As of December 31, 2022, Offerpad Brokerage, LLC, Offerpad Brokerage “FL”, LLC, and Offerpad Brokerage CA, Inc. hold real estate brokerage licenses in certain of our markets and certain other states.
Certain licensed entities also are subject to routine examination and monitoring by the CFPB (for mortgages) and/or state licensing authorities. As of December 31, 2023, OfferPad Brokerage, LLC, OfferPad Brokerage “FL”, LLC, and OfferPad Brokerage CA, Inc. hold real estate brokerage licenses in certain of our markets and certain other states.
For a more detailed discussion of the risks we face in connection with privacy regulations, see “ Risk Factors—Risks Related to Our Intellectual Property and Technology—We process, store and use personal information and other data, which subjects us to governmental regulation and other legal obligations related to privacy, and violation of these privacy obligations could result in a claim for damages, regulatory action, loss of business, or unfavorable publicity. ” In order to provide the broad range of products and services that we offer customers, certain of our subsidiaries maintain real estate brokerage licenses, and we may in the future apply for additional licenses as our business grows and develops.
For a more detailed discussion of the risks we face in connection with privacy regulations, see “ Risk Factors—Risks Related to Our Intellectual Property and Technology—We collect, process, store and use personal information and other data, which subjects us to governmental regulation and other legal obligations related to privacy, and any actual or perceived violation of these privacy obligations could result in a claim for damages, regulatory action, loss of business, or unfavorable publicity. ” In order to provide the broad range of products and services that we offer customers, certain of our subsidiaries maintain real estate brokerage licenses, and we may in the future apply for additional licenses as our business grows and develops.
We believe by offering both Express cash offer and Flex listing services to sellers, and a guided yet flexible and customizable experience to buyers, we have reinvented the home selling and buying experience to meet the digital and on-demand needs of modern consumers.
We believe by offering both cash offer and listing services to sellers, and a guided yet flexible and customizable experience to buyers, we have reinvented the home selling and buying experience to meet the digital and on-demand needs of modern consumers.
As of 2022, there were approximately 1.6 million licensed real estate agents and more than 100,000 U.S. real estate brokerages, with a single brokerage rarely holding more than 10% in a given market. Today, we typically purchase homes with a price of up to $750,000, which represented a potential addressable market opportunity of approximately $1.3 trillion during 2022.
As of 2023, there were approximately 1.6 million licensed real estate agents and more than 100,000 U.S. real estate brokerages, with a single brokerage rarely holding more than 10% in a given market. Today, we typically purchase homes with a price of up to $750,000, which represented a potential addressable market opportunity of approximately $1.0 trillion during 2023.
In our Flex listing service offering, we leverage our technology, scale and logistical expertise to renovate and list a seller’s home for sale while also typically providing a backup cash offer to the seller, thereby providing optionality of process and certainty of outcome.
In our listing service offering, we leverage our technology, scale and logistical expertise to renovate and list a seller’s home for sale while also sometimes providing a backup cash offer to the seller, thereby providing optionality of process and certainty of outcome.
When a customer chooses to list their home with our Offerpad Flex listing service, our Solutions Experts represent the customer throughout the process. The customer will either sell their home directly to a buyer or we will purchase the home under our initial cash offer.
When a customer chooses to list their home with our Offerpad listing service, our Solutions Experts or a partner agent represent the customer throughout the process. The customer will either sell their home directly to a buyer or we will purchase the home under our initial cash offer.
Training and Talent Development To support our strong company culture, we offer a wide range of training and development opportunities, including new employee orientation through our Offerpad University training sessions, which cover a range of topics including company values and culture, and other training programs that support employee growth and development.
Training and Talent Development To support our strong company culture, we offer a wide range of training and development opportunities, including new employee orientation through our onboarding training sessions, which cover a range of topics including company values and culture, and other training programs that support employee growth and development.
As of December 31, 2022, we offer our services in 28 markets in the United States, which tend to share median price points of less than $550,000 and are among the top 100 metropolitan statistical areas (MSAs) in terms of annual residential real estate transactions.
As of December 31, 2023, we offer our services in 25 markets in the United States, which tend to share median price points of less than $550,000 and are among the top 100 metropolitan statistical areas (MSAs) in terms of annual residential real estate transactions.
We believe the scale and versatility of our platform will allow us to continue to expand into new markets, with our barriers to entry primarily being access to adequate capital needed to expand our operations and the tendency of consumers in a given market to adopt our digital real estate offerings.
We believe the scale and versatility of our platform should allow us to continue to expand into new markets, with our barriers to entry primarily being access to adequate capital needed to expand our operations, the tendency of consumers in a given market to adopt our digital real estate offerings and macroeconomic conditions.
We are the registered holder of a variety of domain name registrations, including “offerpad.com”. In addition to the protection provided by our intellectual property rights, we enter into confidentiality and proprietary rights agreements with certain of our employees, consultants, contractors and business partners. Certain of our employees and contractors are also subject to invention assignment agreements.
We are the registered holder of a variety of domain name registrations, including “offerpad.com”. In addition to the protection provided by our intellectual property rights, we enter into confidentiality and proprietary rights agreements with certain of our employees, consultants, contractors and business partners.
Additionally, we plan to start leveraging broad reach channels that allow us to responsibly scale brand awareness. Our Competition The U.S. residential real estate market is highly fragmented and non-integrated. As of 2022, there were over 100,000 U.S. real estate brokerages in the United States, with a single brokerage rarely holding more than 10% share in any market.
Additionally, we may leverage broad reach channels that allow us to responsibly scale brand awareness. Our Competition The U.S. residential real estate market is highly fragmented and non-integrated. As of 2023, there were over 100,000 U.S. real estate brokerages in the United States, with a single brokerage rarely holding more than 10% share in any market.
Since our founding in 2015 through December 31, 2022, we have transacted on homes representing approximately $9.4 billion of aggregate revenue. We believe that this revenue generation is a testament to how the simplicity and ease of iBuying and digital home sales resonates with our customers.
Since our founding in 2015, we have transacted on homes representing approximately $10.7 billion of aggregate revenue through December 31, 2023. We believe that this revenue generation is a testament to how the simplicity and ease of iBuying and digital home sales resonates with our customers.
Our primary goal is to be able to offer multiple services tied to the core real estate transaction, which may in the future include stand-alone remodel services, energy efficiency solutions, smart home technology, insurance, moving services and home warranty services, all with the goal of becoming a singular solution for real estate transactions.
Our primary goal is to be able to offer multiple services tied to the core real estate transaction, which may in the future include services such as energy efficiency solutions, smart home technology, insurance and home warranty services, all with the goal of becoming a singular solution for real estate transactions.
In 2022 and 2021, the median prices of the homes we sold were approximately $350,000 and $300,000, respectively. We intend to further increase our market penetration in these markets through additional brand marketing and improving customer awareness of our offerings, which we anticipate will increase our market share.
In 2023 and 2022, the median prices of the homes we sold were approximately $340,000 and $350,000, respectively. We intend to further increase our market penetration in these markets through additional brand marketing, strengthening local partnerships and improving customer awareness of our offerings, which we anticipate will increase our market share.
Increase advertising and drive brand awareness Even though historically our ability to invest in advertising has been limited due to our focus on capital efficiency we have a proven history of effective local advertising to drive inbound seller inquiries as well as local and national distribution of our active listings for resale.
Offerpad Solutions Inc. | 2023 Form 10-K | 9 Increase advertising and drive brand awareness Even though historically our ability to invest in advertising has been limited due to our focus on capital efficiency we have a proven history of effective local advertising to drive inbound seller inquiries as well as local and national distribution of our active listings for resale.
In our Express cash offer service, sellers can access our website or mobile application to receive a competitive cash offer for their home within 24 hours and quickly close without the major inconveniences associated with traditional real estate selling.
Our platform provides a unique dual approach to helping home sellers. In our cash offer service, sellers can access our website or mobile application to receive a competitive cash offer for their home within 24 hours and quickly close without the major inconveniences associated with traditional real estate selling.
Additionally, state and local laws may restrict the amount and nature of interest and fees that may be charged by a lender or mortgage broker, impose more stringent privacy requirements and protections for servicemembers, and/or otherwise regulate the manner in which lenders or mortgage brokers operate or advertise.
Additionally, state and local laws may restrict the amount and nature of interest and fees that may be charged by a lender or Offerpad Solutions Inc. | 2023 Form 10-K | 12 mortgage broker, impose more stringent privacy requirements and protections for servicemembers, and/or otherwise regulate the manner in which lenders or mortgage brokers operate or advertise.
Our Culture and Core Values Maintaining a strong company culture is critical to our team and is supported through various employee engagement activities. Our culture and passion for what we are building is reflected in the following core values: • Homes not houses .
Offerpad Solutions Inc. | 2023 Form 10-K | 10 Our Culture and Core Values Maintaining a strong company culture is critical to our team and is supported through various employee engagement activities. Our culture and passion for what we are building is reflected in the following core values: • Homes not houses .
Our Flex listing service offering generates higher margins than our Express cash offer service, but accounted for less than 1% of our total revenue in both 2022 and 2021, although we intend to drive greater roll-out of the Flex listing service offering across our platform.
Our listing service offering generates higher margins than our cash offer service, but accounted for approximately 1% of our total revenue in both 2023 and 2022, although we intend to drive greater evolution of the offering and roll-out of listing service offerings across our platform.
Generally, the revenue and margin profiles of our ancillary products and services are different from our Express cash offer service that accounts for the vast majority of our revenues, with most ancillary products and services having a smaller average revenue per transaction than our Express cash offer service, but a higher margin.
Generally, the revenue and margin profiles of our ancillary products and services are different from our cash offer service that accounts for the vast majority of our revenues, with most Offerpad Solutions Inc. | 2023 Form 10-K | 7 ancillary products and services having a smaller average revenue per transaction than our cash offer service, but a higher margin.
We are continuously focused on providing a differentiated approach to our customers through various selling, buying and ancillary services in our Solutions Center. Offerpad Solutions Inc. | 2022 Form 10-K | 6 Offerpad selling services We offer two distinct selling services to our customers.
We are continuously focused on providing a differentiated approach to our customers through various selling, buying and ancillary products and services in our Solutions Center. Offerpad selling services We offer two distinct selling services to our customers.
Our platform provides home buyers the opportunity to browse and tour homes online, get instant access to our listings in certain markets with their mobile devices and submit purchase offers online in a simple process on their own time, with or without an agent.
Our platform provides home buyers the opportunity to browse and tour homes online and submit purchase offers online in a simple process on their own time, with or without an agent.
As we expand further into our existing markets, launch new markets, and develop a wide range of new ancillary services, we look forward to bringing our mission of providing your best way to buy and sell a home to even more homeowners and prospective home purchasers across the country.
As we expand further into our existing markets, launch new markets, and develop a wide range of new ancillary products and services, we look forward to bringing our mission of delivering the best home buying and selling experience to even more homeowners and prospective home purchasers across the country.
Maximizing inventory turnover and increasing returns on invested capital In order to effectively mitigate risk and maximize efficiency of the business, we aim to turn inventory quickly while maintaining our underwritten to actual sales price accuracy.
Offerpad Solutions Inc. | 2023 Form 10-K | 8 Maximizing real estate inventory turnover and increasing returns on invested capital In order to effectively mitigate risk and maximize efficiency of the business, we aim to turn inventory quickly while maintaining our underwritten to actual sales price accuracy.
Add ancillary services Our product expansion strategy focuses on capitalizing on ancillary service opportunities beyond our current mortgage and title service offerings in order to offer multiple services tied to the core real estate transaction, allowing our customers to bundle and save.
Add ancillary products and services Our product expansion strategy focuses on capitalizing on ancillary product and service opportunities beyond our current mortgage and title service offerings in order to offer multiple services tied to the core real estate transaction, allowing our customers to bundle and save. In the mid-term, we anticipate offering additional transaction services, including home warranty and insurance.
Expand relationships with home buyers We continue to pursue opportunities that enable us to grow our service offerings, and have recently begun offering a program that allows cash buyers and single-family rental companies an opportunity to purchase homes directly from the homeowner, matching cash buyers with sellers.
Expand relationships with home buyers We continue to pursue opportunities that enable us to grow our service offerings, and offer a program that allows investors and single-family rental companies an opportunity to purchase homes from homeowners, matching investors with sellers.
For example, during the year ended December 31, 2022, we achieved a net promoter score of 70 and 93% Customer Satisfaction Rating based on a survey of approximately 3,400 customers who sold their home to Offerpad during 2022. As of December 31, 2022, Offerpad operated in over 1,800 cities and towns in 28 metropolitan markets across 16 states.
For example, during the year ended December 31, 2023, we achieved a 91% Customer Satisfaction Rating and a net promoter score of 64% based on a survey of approximately 900 customers who sold their home to Offerpad during 2023. As of December 31, 2023, Offerpad operated in over 1,700 cities and towns in 25 metropolitan markets across 15 states.
Ancillary services We also offer seamless access to ancillary services through our preferred providers, which currently includes title and escrow services, mortgage solutions to make it easy for buyers to finance their next home, and complimentary free local moving for sellers.
These services represented less than 1% of our total revenue in both 2023 and 2022. Ancillary products and services We also offer seamless access to ancillary products and services through our preferred providers, which currently includes title and escrow services, mortgage solutions to make it easy for buyers to finance their next home, and complimentary free local moving for sellers.
Our ancillary products and services represented less than 1% of our total revenue in both 2022 and 2021. Offerpad Solutions Inc. | 2022 Form 10-K | 7 Our Market Opportunity In 2022, roughly $2.3 trillion in value of homes were sold in the U.S. with approximately 5.6 million homes sold for an average home value of approximately $400,000.
Our ancillary products and services represented less than 1% of our total revenue in both 2023 and 2022. Our Market Opportunity In 2023, roughly $1.9 trillion in value of homes were sold in the U.S. with approximately 4.7 million homes sold for an average home value of approximately $400,000.
Customers opting to list with us enjoy the benefits of complimentary list-ready home services, home improvement advances, customized marketing, and dedicated support from our Offerpad Solutions Experts, while listing with confidence knowing they can pivot to our competitive cash offer.
Customers opting to list with us typically enjoy the benefits of complimentary list-ready home services to prepare their home for market, such as carpet cleaning, landscape and pool maintenance, along with home improvement advances, customized marketing, and dedicated support from our Offerpad Solutions Experts or partner agents, while listing with confidence knowing they can pivot to our competitive cash offer.
These laws generally regulate the manner in which lending and lending-related activities are marketed or made available to consumers, including, but not limited to, advertising, finding and qualifying applicants, the provision of consumer disclosures, payments for services, and record keeping requirements; these laws include, at the federal level, the RESPA, the Fair Credit Reporting Act (as amended by the Fair and Accurate Credit Transactions Act), the Truth in Lending Act (including the Home Ownership and Equity Protection Act of 1994), the Equal Credit Opportunity Act, the Fair Housing Act, the Gramm-Leach-Bliley Act, the Electronic Fund Transfer Act, the Servicemembers Civil Relief Act, the Military Lending Act, the Homeowners Protection Act, the Home Mortgage Disclosure Act, the Secure and Fair Enforcement for Mortgage Licensing Act of 2008, the Federal Trade Commission Act, the Dodd Offerpad Solutions Inc. | 2022 Form 10-K | 12 Frank Wall Street Reform and Consumer Protection Act of 2010, the Bank Secrecy Act (including the Office of Foreign Assets Control and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act), the TCPA, the Mortgage Acts and Practices Advertising Rule (Regulation N), the CARES Act, all implementing regulations, and various other federal, state and local laws.
These laws include, at the federal level, the RESPA, the Fair Credit Reporting Act (as amended by the Fair and Accurate Credit Transactions Act), the Truth in Lending Act (including the Home Ownership and Equity Protection Act of 1994), the Equal Credit Opportunity Act, the Fair Housing Act, the Gramm-Leach-Bliley Act, the Electronic Fund Transfer Act, the Servicemembers Civil Relief Act, the Military Lending Act, the Homeowners Protection Act, the Home Mortgage Disclosure Act, the Secure and Fair Enforcement for Mortgage Licensing Act of 2008, the Federal Trade Commission Act, the Dodd Frank Wall Street Reform and Consumer Protection Act of 2010, the Bank Secrecy Act (including the Office of Foreign Assets Control and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act), the TCPA, the Mortgage Acts and Practices Advertising Rule (Regulation N), the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), all implementing regulations, and various other federal, state and local laws.
Customers choosing an Offerpad cash offer avoid the disruption of showing their homes, select their own closing date with the benefit of extended stay in case their new home is not ready, and enjoy complimentary free local moving. If the customer is represented by a third-party agent, we work directly with such agent in addition to paying the agent’s fee.
Customers choosing an Offerpad cash offer avoid the disruption of showing their homes, select their own closing date with the benefit of extended stay in case their new home is not ready, and enjoy complimentary free local moving.
While we intend to be flexible in assessing market entry points, we will generally look to expand into new markets with qualities similar to our existing markets, including median price point, annual transaction count, as well as strong presence of new homebuilders.
While we intend to be flexible in assessing the overall timing of our expansion plan and appropriate market entry points over the coming years, we have historically looked to expand into new markets with qualities similar to our existing markets, including median price point, annual transaction count, as well as strong presence of new homebuilders and institutional buyers.
Since inception, we have focused on improving the unit economics of our model across our markets, with the added benefit of maximizing operational leverage as we scale. A foundation of our strategic approach to growth has been to prove out our business model first, control costs and refine our valuation automation and logistical operations before we scale into additional markets.
A foundation of our strategic approach to growth has been to prove out our business model first, control costs and refine our valuation automation and logistical operations before we scale into additional markets.
Offerpad Solutions Inc. | 2022 Form 10-K | 10 Human Capital Resources Overview We believe that we have a talented, motivated and dedicated team, and are committed to supporting the development of all of our team members. As of December 31, 2022, we employed approximately 900 people, nearly all on a full-time basis.
Human Capital Resources Overview We believe that we have a talented, motivated and dedicated team, and are committed to supporting the development of all of our team members. As of December 31, 2023, we employed approximately 350 people, nearly all on a full-time basis. None of our employees are represented by a labor union or covered by collective bargaining agreements.
As part of our planned expansion, we have given strategic consideration to which markets we would plan to open Offerpad Solutions Inc. | 2022 Form 10-K | 9 first and what the resource requirements for establishing a presence in those markets would be.
Looking forward, we intend to apply rigorous criteria to identify which additional MSAs we plan to expand into in the future. As part of our planned expansion, we have given strategic consideration to which markets we would plan to open first and what the resource requirements for establishing a presence in those markets would be.
When we see a problem, we solve it. • Embrace our roots . We know homes. We understand the people in those homes at a “living room” level. We leverage our past to provide your best way to buy and sell a home.
We understand the people in those homes at a “living room” level and use that experience and expertise to provide the best way to buy and sell a home.
As we increased our scale and improved our workflow optimization in prior years, our average inventory holding period of homes sold improved from 138 days in 2016 to 95 days in both 2019 and 2020.
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 101 days during 2022 and 97 days during the fourth quarter of 2023, which is consistent with our expected average real estate inventory holding period and our historical norm.
None of our employees are represented by a labor union or covered by collective bargaining agreements. We believe we have strong and positive relations with our employees. We also engage numerous consultants and contractors to supplement our permanent workforce, primarily to assist with renovating our homes.
We believe we have strong and positive relations with our employees. We also engage numerous consultants and contractors to supplement our permanent workforce, primarily to assist with renovating our homes, and real estate agent partners as part of our listing service offering.
Compensation and Employee Benefits To attract and retain top talent, we offer our employees a broad range of company-paid benefits and highly competitive compensation packages. Our employees are eligible for medical, dental and vision insurance, a savings/retirement plan, life and disability insurance, various wellness programs and tuition reimbursement, along with other optional benefits designed to meet individual employee needs.
Our employees are eligible for medical, dental and vision insurance, a savings/retirement plan, life and disability insurance, various wellness programs and tuition reimbursement, along with other optional benefits designed to meet individual employee needs. Well-being and Hybrid Work We are committed to supporting our employees’ well-being and safety while they are at work and in their personal lives.
We further restrict the use of our proprietary technology and intellectual property through provisions in both our general and product-specific terms of use on our website. Government Regulation We operate in highly regulated businesses through a number of different channels across the United States.
Government Regulation We operate in highly regulated businesses through a number of different channels across the United States.
Offerpad Solutions Inc. | 2022 Form 10-K | 11 As of December 31, 2022, we have 15 total IP registrations and pending applications including: four registered U.S. trademarks, three foreign registered trademarks, six pending U.S. trademark applications and two U.S. issued copyright registrations. Our trademarks registrations and applications include “Offerpad” and the Offerpad logo.
As of December 31, 2023, our registered IP portfolio includes: nine registered U.S. trademarks, three foreign registered trademarks, four pending U.S. trademark applications and two U.S. copyright registrations. Our trademarks registrations include “Offerpad” and the Offerpad logo, and our pending applications include taglines and trademarks for services in development by Offerpad.
Our “Instant access” feature enables buyers in certain markets to enter our homes with the push of a button on their mobile device. This combination of technology, automation and machine learning paired with real estate expertise enhances the accuracy in our underwriting to actual sales prices and improves our unit-level economic performance.
This combination of technology, automation and machine learning paired with real estate expertise enhances the accuracy in our underwriting to actual sales prices and improves our unit-level economic performance. Operational expertise We know how to efficiently manage the logistical challenge of buying, renovating and selling thousands of homes across 25 differentiated markets.
We provide convenience, control, and certainty in all we do. • Every day matters . We operate with urgency in pursuit of delivering the best customer experience in the industry. There’s no room for hesitation – we count the days with the goal to use less. • Results rule . We get things done. We celebrate doers.
We provide simplicity, peace of mind and freedom in everything we do. • Every day matters . We work with a sense of urgency to deliver the best customer experience in the industry. There’s no room for hesitation. We count the days with the goal to use less, so customers can spend less time ‘real estat-ing’. • Results rule .
Given the recent volatility in the residential real estate market conditions, we currently do not anticipate expanding into any new markets in the first half of 2023 and expect to re-evaluate expansion plans in the second half of the year.
Further, given the uncertainty regarding the near-term macroeconomic conditions, including the path of ongoing inflation in the broader economy, the impact of geopolitical conflicts and the direction of mortgage interest rates, we currently do not anticipate expanding into any new markets in the first half of 2024 and expect to re-evaluate expansion plans in the second half of the year.
In connection with the closing of the Business Combination, Supernova changed its name to Offerpad Solutions Inc. The Business Combination was accounted for as a reverse recapitalization. Available Information We file our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements and other information electronically with the Securities and Exchange Commission (“SEC”).
Available Information We file our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements and other information electronically with the Securities and Exchange Commission (“SEC”). Our SEC filings are available to the public on the SEC’s website at www.sec.gov.
We aspire to be the leading on-demand real estate solutions provider that offers customers the convenience, control and certainty to solve their housing needs. Who We Are Offerpad was founded in 2015 to create a better residential real estate experience by combining advanced technology solutions with fundamental industry expertise.
Who We Are Offerpad was founded to create a better residential real estate experience by combining advanced technology solutions with fundamental industry expertise. From cash offers and flexible listing options to mortgages and buyer services, we have been helping homeowners since 2015. We provide streamlined, data driven iBuying and real estate solutions for the on-demand customer.
In the mid-term, we anticipate offering additional transaction services, including home warranty and insurance, as well as an entry into home personalization through stand-alone remodel services. Finally, in the long-term, we intend to seek to provide a personal, efficient, and hassle-free full home ownership partnership with offerings such as energy efficiency and smart home capabilities.
Finally, in the long-term, we intend to seek to provide a personal, efficient, and hassle-free full home ownership partnership with offerings such as energy efficiency and smart home capabilities. Marketing Our sales and marketing efforts utilize a multichannel approach, including paid advertising, earned media and partnerships, with a focus on efficiency and low-cost growth.
We provide streamlined, data driven iBuying and real estate solutions for the on-demand customer. Our digital Solutions Center platform gives users a holistic, customer-centric experience, enabling them to efficiently sell and buy their homes online with streamlined access to ancillary services such as mortgage and title insurance. Our platform provides a unique dual approach to helping home sellers.
We pair our local expertise in residential real estate with proprietary technology to put customers in control of the process and help find the right solution that fits their needs. Our digital Solutions Center platform gives users a holistic, customer-centric experience, enabling them to efficiently sell and buy their homes online with streamlined access to ancillary products and services.
Through our Offerpad Flex listing service offering, our customers essentially dual track a sale by utilizing both our personalized listing services while also typically having a backup cash offer.
If the customer is represented by a third-party agent, we work Offerpad Solutions Inc. | 2023 Form 10-K | 6 directly with such agent in addition to paying the agent’s fee. Through our Offerpad listing service offering, our customers essentially dual track a sale by utilizing both our personalized listing services while also sometimes having a backup cash offer.
We optimize our workforce through a mix of internal employees and external contractors and have local project managers that manage the renovation in its entirety. We maintain market-by-market standards to ensure quality, cost, and time efficiency, deploying our own field automation software to enable accurate progress reporting as well as labor and material tracking.
We maintain market-by-market standards to ensure quality, cost, and time efficiency, deploying our own field automation software to enable accurate progress reporting as well as labor and material tracking. Scalable platform, with proven economics and capital efficiency We have a leading, scalable and low-cost transaction platform. We have created a pioneering iBuying company and leading on-demand real estate marketplace.
We expect this program will allow us to help more homeowners sell their home, while also expanding our ability to reach more customers. Marketing Our sales and marketing efforts utilize a multichannel approach, including paid advertising, earned media and partnerships, with a focus on efficiency and low-cost growth.
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.
Item 1. Business. Our Mission Offerpad’s mission is to provide your best way to buy and sell a home. Period. We are a pioneer in using technology-enabled solutions across our digital platform to remake the home selling and buying experience.
Item 1. Business. Our Mission Offerpad’s mission is to deliver the best home buying and selling experience. By using technology-enabled solutions across our digital platform, we strive to be the leading on-demand real estate solutions provider that offers customers the simplicity, peace of mind and freedom to solve their housing needs.
We focus on geographic diversification across high population growth cities with affordable median sales prices and increasing employment characteristics. Looking forward, we are applying rigorous criteria to identify which additional MSAs we plan to expand into in the future.
We have historically focused on geographic diversification across high population growth cities with affordable median sales prices and increasing employment characteristics. However, given the dislocated residential real estate market conditions during the second half of 2022 and the first quarter of 2023, we did not expand into any new markets during 2023.
Removed
Below is a summary of our current ancillary products and services: • Concierge Listing Service : While partnering with Offerpad, the customer will be provided with complementary list-ready services to prepare their home for market, such as carpet cleaning, landscape and pool maintenance, and handyman services.
Added
Renovation services We have extended our 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.
Removed
Operational expertise We know how to efficiently manage the logistical challenge of buying, renovating and selling thousands of homes across 28 differentiated markets. Since our inception to December 31, 2022, we have bought and sold in aggregate nearly 70,000 homes and have completed nearly 30,000 home renovations.
Added
Through this offering, we are able to leverage our existing logistics, operation and skill-sets to provide renovation services that we believe could be a more significant component of our business over time.
Removed
Offerpad Solutions Inc. | 2022 Form 10-K | 8 Scalable platform, with proven economics and capital efficiency We have a leading, scalable and low-cost transaction platform. We have created a pioneering iBuying company and leading on-demand real estate marketplace. Our significant growth relative to our limited capital invested is testament to our efficiency and results driven culture.
Added
In addition to the renovation project fee, we are also typically compensated for these renovation services with a service fee that is based on a percentage of the overall renovation project fee. Our renovation services represented less than 1% of our total revenue in both 2023 and 2022.
Removed
Our average inventory holding period of homes sold further decreased to 76 days during 2021, which was primarily due to the favorable housing market conditions across our markets in 2021.
Added
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.
Removed
During 2022, the residential real estate market conditions were highly volatile, with generally favorable conditions during the first half of the year, shifting to considerable softening in consumer demand for residential real estate during the second half of the year as a result of various macroeconomic factors negatively impacting housing affordability and homebuyer sentiment.
Added
Since our inception to December 31, 2023, we have executed in aggregate over 77,000 buy and sale transactions and have completed nearly 34,000 home renovations. We optimize our workforce through a mix of internal employees and external contractors and have local project managers that manage the renovation in its entirety.
Removed
Given our focus on risk management, and in response to this softening consumer demand, we adjusted our home purchase criteria through more conservative acquisition underwriting, resulting in higher expected internal rates of return based on current market conditions, and continued to adjust pricing on our inventory to reflect market level trends throughout the second half of 2022.
Added
Our significant growth relative to our limited capital invested is testament to our efficiency and results driven culture. Since inception, we have focused on improving the unit economics of our model across our markets, with the added benefit of maximizing operational leverage as we scale.
Removed
These actions resulted in a significant reduction in our home acquisition pace to allow us to manage overall inventory growth, which led to the average holding period of homes sold increasing to 101 days during 2022, which is consistent with our expected average inventory holding period and our historical norm.
Added
As our product and service offerings continue to evolve, our new market expansion strategies will as well. For instance, we may enter into new markets to offer our renovation services, but may not offer buying and selling services in such markets.
Removed
As our overall inventory mix shifts and includes a lower composition of newer acquired homes, our average inventory holding period generally increases. As a result, and given our reduction in home acquisition pace, we anticipate our average inventory holding period will continue to increase in early 2023.
Added
Increase renovation services We have extended our 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. We believe renovation services could be a more significant component of our business over time and plan to increase focus on such services in the future.
Removed
Our broad-based team has been able to leverage their experience at technology companies like Amazon, Doordash, GoDaddy, Intel and Zappos, real estate companies like AV Homes, Progress Residential and Taylor Morrison, and financial institutions such as Citi and Morgan Stanley.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeA number of factors have in the past, and could in the future adversely affect our business, including the following: • downturns in the U.S. residential real estate market — both seasonal and cyclical — in particular with respect to the single-family home resale market and the markets in which we operate; • changes in national, regional, or local economic, demographic or real estate market conditions; • the continuing impact of the COVID-19 pandemic and any future pandemic, including with respect to buying and selling trends in the residential real estate market and potential governmental or regulatory changes or requirements; • slow economic growth or recessionary or inflationary conditions; • increased levels of unemployment or declining wages; • declines in the value of residential real estate or the pace of home appreciation, or the lack thereof; Offerpad Solutions Inc. | 2022 Form 10-K | 13 • illiquidity in residential real estate; • overall conditions in the housing market, including macroeconomic shifts in demand, and increases in costs for homeowners such as property taxes, homeowners’ association fees and insurance costs; • low levels of consumer confidence in the economy in general or the U.S. residential real estate industry in particular; • low home inventory levels or lack of affordably priced homes; • increased mortgage interest rates or down payment requirements or restrictions on mortgage financing availability; • increases in household debt levels; • volatility and general declines in the stock market; • federal, state, or local legislative or regulatory changes that would negatively impact owners or potential purchasers of single-family homes or the residential real estate industry in general, such as the Tax Cuts and Jobs Act of 2017 (the “Tax Act”), which limited deductions of certain mortgage interest expenses and property taxes; or • natural disasters, such as hurricanes, windstorms, tornadoes, earthquakes, wildfires, floods, hailstorms and other events that disrupt local, regional, or national real estate markets.
Biggest changeA number of factors have in the past, and could in the future adversely affect our business, including the following: • downturns in the U.S. residential real estate market — both seasonal and cyclical — in particular with respect to the single-family home resale market and the markets in which we operate; • changes in national, regional, or local economic, demographic or real estate market conditions; • slow economic growth or recessionary or inflationary conditions; • increased levels of unemployment or declining wages; • declines in the value of residential real estate or the pace of home appreciation, or the lack thereof; • illiquidity in residential real estate; • overall conditions in the housing market, including macroeconomic shifts in demand, and increases in costs for homeowners such as property taxes, homeowners’ association fees and insurance costs; • low levels of consumer confidence in the economy in general or the U.S. residential real estate industry in particular; • low home inventory levels or lack of affordably priced homes; • increased mortgage interest rates or down payment requirements or restrictions on mortgage financing availability; Offerpad Solutions Inc. | 2023 Form 10-K | 13 • increases in household debt levels; • volatility and general declines in the stock market; • federal, state, or local legislative or regulatory changes that would negatively impact owners or potential purchasers of single-family homes or the residential real estate industry in general, such as the Tax Cuts and Jobs Act of 2017 (the “Tax Act”), which limited deductions of certain mortgage interest expenses and property taxes; or • natural disasters, such as hurricanes, windstorms, tornadoes, earthquakes, wildfires, floods, hailstorms, pandemics and other events that disrupt local, regional, or national real estate markets.
In order to grow our business, we anticipate that we will continue to depend on relationships with third parties, such as settlement service providers, lenders, real estate agents, valuation companies, vendors we use to renovate, service or repair our homes, third-party partners we rely on for referrals, such as homebuilders and online real estate websites or institutional buyers of our inventory.
In order to grow our business, we anticipate that we will continue to depend on relationships with third parties, such as settlement service providers, lenders, real estate agents, valuation companies, vendors we use to renovate, service or repair our homes, third-party partners we rely on for referrals, such as homebuilders and online real estate websites or institutional buyers of our real estate inventory.
If we lose existing relationships with MLSs and other listing providers, whether due to termination of agreements or otherwise, changes to our rights to use or timely access listing data, an inability to continue to add new listing providers or changes to the way real estate information is shared, our ability to price or list our inventory for resale could be impaired and our operating results may suffer.
If we lose existing relationships with MLSs and other listing providers, whether due to termination of agreements or otherwise, changes to our rights to use or timely access listing data, an inability to continue to add new listing providers or changes to the way real estate information is shared, our ability to price or list our real estate inventory for resale could be impaired and our operating results may suffer.
Additionally, we may incur significant losses in the future for a number of reasons, including: • our inability to grow market share in our existing markets or any new markets we may enter; • our expansion into new markets; • declines in U.S. residential real estate transaction volumes; • increased competition in the U.S. residential real estate industry; • changes in our fee structure or rates; • our failure to accurately price homes we acquire or changes to resale prices during the time homes are in inventory; Offerpad Solutions Inc. | 2022 Form 10-K | 15 • our failure to realize anticipated efficiencies through our technology and business model; • costs associated with enhancements, or new offerings of our products and services; • failure to execute our growth strategies; • increased marketing costs; • lack of access to housing market data that is used in our pricing models at reasonable cost; • hiring additional personnel to support our overall growth; • loss in value of real estate or potential impairments in the value of our assets due to changes in market conditions in the area in which real estate or assets are located; • increases in costs associated with holding our real estate inventories, including financing costs; • the availability of debt financing and securitization funding to finance our real estate inventories; and • unforeseen expenses, difficulties, complications and delays, and other unknown factors.
Additionally, we may incur significant losses in the future for a number of reasons, including: • our inability to grow market share in our existing markets or any new markets we may enter; • our expansion into new markets; • declines in U.S. residential real estate transaction volumes; • increased competition in the U.S. residential real estate industry; • changes in our fee structure or rates; Offerpad Solutions Inc. | 2023 Form 10-K | 15 • our failure to accurately price homes we acquire or changes to resale prices during the time homes are in real estate inventory; • our failure to realize anticipated efficiencies through our technology and business model; • costs associated with enhancements, or new offerings of our products and services; • failure to execute our growth strategies; • increased marketing costs; • lack of access to housing market data that is used in our pricing models at reasonable cost; • hiring additional personnel to support our overall growth; • loss in value of real estate or potential impairments in the value of our assets due to changes in market conditions in the area in which real estate or assets are located; • increases in costs associated with holding our real estate inventories, including financing costs; • the availability of debt financing and securitization funding to finance our real estate inventories; and • unforeseen expenses, difficulties, complications and delays, and other unknown factors.
Having such a large portion of our total assets in the form of non-income producing homes inventory for an extended period of time subjects us to significant holding costs, including financing expenses, maintenance and upkeep expenses, insurance expenses, property tax expenses, homeowners’ association fees, utility fees and other expenses that accompany the ownership of residential real property and increased risk of depreciation of value, in addition to risks related to declining real estate valuations.
Having such a large portion of our total assets in the form of non-income producing real estate inventory for an extended period of time subjects us to significant holding costs, including financing expenses, maintenance and upkeep expenses, insurance expenses, property tax expenses, homeowners’ association fees, utility fees and other expenses that accompany the ownership of residential real property and increased risk of depreciation of value, in addition to risks related to declining real estate valuations.
Under these circumstances, our losses could have a material adverse effect on our results of operations or financial condition. Risks Related to Our Capital Structure and Ownership of Our Class A Common Stock and Warrants Future resales of common stock may cause the market price of our securities to drop significantly, even if our business is doing well.
Under these circumstances, our losses could have a material adverse effect on our results of operations or financial condition. Risks Related to Our Capital Structure and Ownership of Our Class A Common Stock Future resales of common stock may cause the market price of our securities to drop significantly, even if our business is doing well.
If we are unable to successfully recruit and retain a sufficient number of productive internal and independent real estate agents we may be unable to maximize our revenue and market share growth. We are subject to the requirements governing the licensing and conduct of real estate brokerage and brokerage-related businesses in the jurisdictions in which we do business.
If we are unable to successfully recruit and retain a sufficient number of productive independent real estate agents we may be unable to maximize our revenue and market share growth. We are subject to the requirements governing the licensing and conduct of real estate brokerage and brokerage-related businesses in the jurisdictions in which we do business.
Additionally, laws, regulations, and standards covering marketing and advertising activities conducted by telephone, email, mobile devices, and the internet, may be applicable to our business, such as the Telephone Consumer Protection Act (the “ TCPA ”) (as implemented by the Telemarketing Sales Rule), the CAN-SPAM Act, and similar state consumer protection laws.
Additionally, laws, regulations, guidelines and standards covering marketing and advertising activities conducted by telephone, email, mobile devices, and the internet, may be applicable to our business, such as the Telephone Consumer Protection Act (the “ TCPA ”) (as implemented by the Telemarketing Sales Rule), the CAN-SPAM Act, and similar state consumer protection laws.
Any expansion or new offering requires significant expenses and the time of our key personnel, particularly at the outset of the process, and our new service offerings, and expansion of our Flex listing service platform may not result in the customer conversion or profitability that we expect.
Any expansion or new offering requires significant expenses and the time of our key personnel, particularly at the outset of the process, and our new service offerings, and expansion of our listing service platform may not result in the customer conversion or profitability that we expect.
We expect that there will continue to be new proposed laws, regulations, and industry standards concerning privacy, data protection, and information security and we cannot determine the impact such future laws, regulations, and standards may have on our business.
We expect that there will continue to be new proposed laws, regulations, and industry standards and guidelines concerning privacy, data protection, and information security and we cannot determine the impact such future laws, regulations, and standards may have on our business.
It is possible that these video inspections may not be effective in identifying undisclosed issues, conditions or defects that an in-person inspection might otherwise reveal, which could result in us incurring unforeseen costs during the resale process. Our business is dependent upon an adequate and desirable supply of inventory, which is impacted by many factors.
It is possible that these video inspections may not be effective in identifying undisclosed issues, conditions or defects that an in-person inspection might otherwise reveal, which could result in us incurring unforeseen costs during the resale process. Our business is dependent upon an adequate and desirable supply of real estate inventory, which is impacted by many factors.
The success of our business may also depend on our ability to successfully integrate additional ancillary services into our platform, including renovation, insurance and home warranty services.
The success of our business may also depend on our ability to successfully integrate additional ancillary products and services into our platform, including renovation, insurance and home warranty services.
We may also be required to repay amounts owed with respect to a financed home prior to the sale of that home and prior to maturity of the related financing facility, typically due to the home having been held in our inventory for an extended period of time or, less commonly, if other unforeseen issues with the home arise during our holding period.
We may also be required to repay amounts owed with respect to a financed home prior to the sale of that home and prior to maturity of the related financing facility, typically due to the home having been held in our real estate inventory for an extended period of time or, less commonly, if other unforeseen issues with the home arise during our holding period.
If we have excess inventory or our average days to sale increases, as occurred during the year ended December 31, 2022, our liquidity and the results of our operations will be adversely affected due to our inability to sell such inventory at prices that allow us to meet margin targets or to recover our costs.
If we have excess real estate inventory or our average days to sale increases, as occurred during the year ended December 31, 2022, our liquidity and the results of our operations will be adversely affected due to our inability to sell such real estate inventory at prices that allow us to meet margin targets or to recover our costs.
Our effective tax rates could be affected by numerous factors, such as entry into new businesses and geographies, changes to our existing business and operations, acquisitions and investments and how they are financed, changes in our stock price, changes in our deferred tax assets and liabilities and their valuation, and changes in the relevant tax, accounting, and other laws, regulations, administrative practices, principles and interpretations (such as the recent United States Inflation Reduction Act which, among other changes, introduced a 15% corporate minimum tax on certain United States corporations and a 1% excise tax on certain stock redemptions by United States corporations).
Our effective tax rates could be affected by numerous factors, such as entry into new businesses and geographies, changes to our existing business and operations, acquisitions and investments and how they are financed, changes in our stock price, changes in our deferred tax assets and liabilities and their valuation, and changes in the relevant tax, accounting, and other laws, regulations, administrative practices, principles and interpretations (such as the United States Inflation Reduction Act of 2022 which, among other changes, introduced a 15% corporate minimum tax on certain United States corporations and a 1% excise tax on certain stock redemptions by United States corporations).
Offerpad Solutions Inc. | 2022 Form 10-K | 19 If the methodologies we use to assess the value and condition of homes are inaccurate, including because of the information supplied to us by prospective sellers or due to the physical inspections being ineffective, it could result in unforeseen costs and risks.
Offerpad Solutions Inc. | 2023 Form 10-K | 19 If the methodologies we use to assess the value and condition of homes are inaccurate, including because of the information supplied to us by prospective sellers or due to the physical inspections being ineffective, it could result in unforeseen costs and risks.
As a result of these factors, we may be unable to acquire or sell inventory at attractive prices or to finance and manage inventory effectively, and accordingly our revenue, gross margins and results of operations would be affected, which could have a material adverse effect on our business, financial condition and results of operations.
As a result of these factors, we may be unable to acquire or sell real estate inventory at attractive prices or to finance and manage real estate inventory effectively, and accordingly our revenue, gross margins and results of operations would be affected, which could have a material adverse effect on our business, financial condition and results of operations.
Failure to hedge effectively against interest rate changes may adversely affect our results of operations. Borrowings under our senior secured facilities accrue interest at variable rates and expose us to interest rate risk. As interest rates increase, our debt service obligations on the variable rate indebtedness increase and our earnings and cash flows correspondingly decrease.
Failure to hedge effectively against interest rate changes may adversely affect our results of operations. Borrowings under our senior and mezzanine secured credit facilities accrue interest at variable rates and expose us to interest rate risk. As interest rates increase, our debt service obligations on the variable rate indebtedness increase and our earnings and cash flows correspondingly decrease.
Any inability to acquire sufficient or desirable inventory may adversely affect our business, sales and results of operations. We primarily acquire homes directly from consumers and there can be no assurance of an adequate or desirable supply of such homes on terms that are attractive to us.
Any inability to acquire sufficient or desirable real estate inventory may adversely affect our business, sales and results of operations. We primarily acquire homes directly from consumers and there can be no assurance of an adequate or desirable supply of such homes on terms that are attractive to us.
We process, store and use personal information and other data, which subjects us to governmental regulation and other legal obligations related to privacy, and any actual or perceived violation of these privacy obligations could result in a claim for damages, regulatory action, loss of business, or unfavorable publicity.
We collect, process, store and use personal information and other data, which subjects us to governmental regulation and other legal obligations related to privacy, and any actual or perceived violation of these privacy obligations could result in a claim for damages, regulatory action, loss of business, or unfavorable publicity. We collect, store, disclose and process personal information and other data.
If we fail to maintain adequate relationships with potential financial sources, or if we are unable to renew, refinance or extend our existing debt arrangements on favorable terms or at all, we may be unable to maintain sufficient inventory, which would adversely affect our business and results of operations.
If we fail to maintain adequate relationships with potential financial sources, or if we are unable to renew, refinance or extend our existing debt arrangements on favorable terms or at all, we may be unable to maintain sufficient real estate inventory, which would adversely affect our business and results of operations.
If we fail to adjust our pricing to stay in line with broader market trends, or fail to recognize those trends, it could adversely affect our ability to acquire inventory. We remain dependent on customers to sell us homes. Our ongoing ability to acquire homes is critical to our business model.
If we fail to adjust our pricing to stay in line with broader market trends, or fail to recognize those trends, it could adversely affect our ability to acquire real estate inventory. We remain dependent on customers to sell us homes. Our ongoing ability to acquire homes is critical to our business model.
If there is a breach of our computer systems, and we know or suspect that certain personal information has been accessed, or used inappropriately, we may need to inform the affected individual (and regulatory body) and may be subject to significant fines and penalties.
If there is a breach of our IT Systems, and we know or suspect that certain personal information has been accessed, or used inappropriately, we may need to inform the affected individual (and regulatory body) and may be subject to significant fines and penalties.
Our business model and growth strategy depend on our marketing efforts and ability to maintain our brand and attract customers to our platform in a cost-effective manner. Our long-term success depends in part on our ability to continue to attract more buyers and sellers to our platform in each of our markets.
Our business model and growth strategy depend on our marketing and partner channel efforts and ability to maintain our brand and attract customers to our platform in a cost-effective manner. Our long-term success depends in part on our ability to continue to attract more buyers and sellers to our platform in each of our markets.
A lack of available or desirable homes that meet our purchase criteria may affect our ability to scale. Reductions in our acquisitions of homes may have adverse effects on our ability to reach our desired inventory levels, our desired portfolio diversification and our results of operations.
A lack of available or desirable homes that meet our purchase criteria may affect our ability to scale. Reductions in our acquisitions of homes may have adverse effects on our ability to reach our desired real estate inventory levels, our desired portfolio diversification and our results of operations.
Our marketing efforts may not succeed for a variety of reasons, including changes to search engine algorithms, ineffective campaigns across marketing channels, limited experience in new marketing channels and any technical difficulties customers may experience using our applications.
Our marketing and partner channel efforts may not succeed for a variety of reasons, including changes to search engine algorithms, ineffective campaigns across marketing channels, limited experience in new marketing channels and any technical difficulties customers may experience using our applications.
If these increased costs are significant across our homes inventory, both in terms of costs per home and numbers of homes impacted, this could have an adverse impact on our results of operations that is material.
If these increased costs are significant across our real estate inventory, both in terms of costs per home and numbers of homes impacted, this could have an adverse impact on our results of operations that is material.
A reduction in the availability of or access to inventory could adversely affect our business, sales and results of operations. Additionally, we evaluate thousands of potential homes daily using our proprietary pricing model.
A reduction in the availability of or access to real estate inventory could adversely affect our business, sales and results of operations. Additionally, we evaluate thousands of potential homes daily using our proprietary pricing model.
These laws generally regulate the manner in which lending and lending-related activities are marketed or made available to consumers, including, but not limited to, advertising, finding and qualifying applicants, the provision of consumer disclosures, payments for services, and record keeping requirements; these laws include, at the federal level, the Real Estate Settlement Procedures Act, the Fair Credit Reporting Act (as amended by the Fair and Accurate Credit Transactions Act), the Truth in Lending Act (including the Home Ownership and Equity Protection Act of 1994), the Equal Credit Opportunity Act, the Fair Housing Act, the Gramm-Leach-Bliley Act, the Electronic Fund Transfer Act, the Servicemembers Civil Relief Act, the Military Lending Act, the Homeowners Protection Act, the Home Mortgage Disclosure Act, the Secure and Fair Enforcement for Mortgage Licensing Act of 2008, the Offerpad Solutions Inc. | 2022 Form 10-K | 22 Federal Trade Commission Act, the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010, the Bank Secrecy Act (including the Office of Foreign Assets Control and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act), the Telephone Consumer Protection Act, the Mortgage Acts and Practices Advertising Rule (Regulation N), the Coronavirus Aid, Relief, and Economic Security Act, all implementing regulations, and various other federal laws.
These laws generally regulate the manner in which lending and lending-related activities are marketed or made available to consumers, including, but not limited to, advertising, finding and qualifying applicants, the provision of consumer disclosures, payments for services, and record keeping requirements; these laws include, at the federal level, the Real Estate Settlement Procedures Act, the Fair Credit Reporting Act (as amended by the Fair and Accurate Credit Transactions Act), the Truth in Lending Act (including the Home Ownership and Equity Protection Act of 1994), the Equal Credit Opportunity Act, the Fair Housing Act, the Gramm-Leach-Bliley Act, the Electronic Fund Transfer Act, the Servicemembers Civil Relief Act, the Military Lending Act, the Homeowners Protection Act, the Home Mortgage Disclosure Act, the Secure and Fair Enforcement for Mortgage Licensing Act of 2008, the Federal Trade Commission Act, the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010, the Bank Secrecy Act (including the Office of Foreign Assets Control and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act), the Telephone Consumer Protection Act, the Mortgage Acts and Practices Advertising Rule (Regulation N), the Coronavirus Aid, Relief, and Economic Security Act, all implementing regulations, and various other federal laws.
Our business is dependent upon our ability to accurately value and manage inventory and an ineffective pricing or portfolio management strategy may have an adverse effect on our business, sales and results of operations.
Our business is dependent upon our ability to accurately value and manage real estate inventory and an ineffective pricing or portfolio management strategy may have an adverse effect on our business, sales and results of operations.
Risks Related to Our Business and Industry Our business and operating results may be significantly impacted by general economic conditions, the health of the U.S. residential real estate industry and risks associated with our real estate assets.
Risks Related to Our Business and Industry Our business and operating results may be significantly impacted by general economic conditions, the health of the U.S. residential real estate industry and risks associated with our real estate inventory.
Any of these events could cause us to incur significant costs in investigating and defending such claims and, if found liable, pay significant damages. Further, these proceedings and any subsequent adverse outcomes may cause our customers to lose trust in us, which could have an adverse effect on our reputation and business.
Any of these events could cause us to incur significant costs in investigating and defending such claims and, if found liable, pay significant damages. Further, these proceedings and any subsequent adverse outcomes may cause significant reputational harm to our brand and our customers to lose trust in us, which could have an adverse effect on our reputation and business.
Housing markets and housing stock in different areas can vary widely and certain markets may be more adaptable to our current business model than others. As we continue to expand, we may launch our products or services in markets that prove to be more challenging for our business model.
Housing markets and housing stock in different areas can vary widely and certain markets may be more adaptable to our current business model than others. As our business grows, we may launch our products or services in markets that prove to be more challenging for our business model.
Closures of local recording offices or other governmental offices in charge of real property records, including tax or lien-related records, would adversely affect our ability to conduct operations in the affected geographies. Any of these delays will likely result in extended hold times, increased costs and impairments.
Closures of local recording offices or other governmental offices in charge of real property records, including tax or lien-related records, would adversely affect our ability to conduct operations in the affected geographies. Any of these delays will likely result in extended hold times, increased costs and inventory valuation adjustments.
If any analyst who may cover us were Offerpad Solutions Inc. | 2022 Form 10-K | 37 to cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our stock price or trading volume to decline.
If any analyst who may cover us were Offerpad Solutions Inc. | 2023 Form 10-K | 36 to cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our stock price or trading volume to decline.
Offerpad Solutions Inc. | 2022 Form 10-K | 20 There are risks related to our ownership of vacant homes and the listing of those homes for resale that are not possible to fully eliminate. The homes in our inventory generally are not occupied during the time we own them prior to resale.
Offerpad Solutions Inc. | 2023 Form 10-K | 20 There are risks related to our ownership of vacant homes and the listing of those homes for resale that are not possible to fully eliminate. The homes in our real estate inventory generally are not occupied during the time we own them prior to resale.
Among other things, our certificate of incorporation and bylaws include provisions that: • authorize Class B common stock that entitle Brian Bair, our Chief Executive Officer and founder, to 10 votes per share of such stock until the Sunset Date; • provide for a classified board of directors with staggered, three-year terms; • permit our board of directors to issue shares of preferred stock, including “blank check” preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; • following the Sunset Date, require that any action of our stockholders be effected only at a meeting of stockholders and not by written consent; • following the Sunset Date, provide that a director may be removed from office only for cause; • following the Sunset Date, provide that vacancies on our board of directors can be filled only by the vote of directors then in office; • prohibit cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; Offerpad Solutions Inc. | 2022 Form 10-K | 32 • limit the liability of, and provide for the indemnification of, our directors and officers; • permit our board of directors to amend the bylaws, which may allow our board of directors to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend the bylaws to facilitate an unsolicited takeover attempt; • require a supermajority vote of stockholders to amend certain provisions of our certificate of incorporation and, following the Sunset Date, a supermajority vote of stockholders in order to amend the bylaws; • limit our ability to engage in business combinations with certain interested stockholders without certain approvals; and • mandate advance notice procedures with which stockholders must comply in order to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in our board of directors and also may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our company.
Among other things, our certificate of incorporation and bylaws include provisions that: • provide for a classified board of directors with staggered, three-year terms; • permit our board of directors to issue shares of preferred stock, including “blank check” preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; • following the Sunset Date, require that any action of our stockholders be effected only at a meeting of stockholders and not by written consent; • following the Sunset Date, provide that a director may be removed from office only for cause; • following the Sunset Date, provide that vacancies on our board of directors can be filled only by the vote of directors then in office; • prohibit cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • limit the liability of, and provide for the indemnification of, our directors and officers; Offerpad Solutions Inc. | 2023 Form 10-K | 32 • permit our board of directors to amend the bylaws, which may allow our board of directors to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend the bylaws to facilitate an unsolicited takeover attempt; • require a supermajority vote of stockholders to amend certain provisions of our certificate of incorporation and, following the Sunset Date, a supermajority vote of stockholders in order to amend the bylaws; • limit our ability to engage in business combinations with certain interested stockholders without certain approvals; and • mandate advance notice procedures with which stockholders must comply in order to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in our board of directors and also may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our company.
There are numerous federal and state laws, as well as regulations and industry guidelines, regarding privacy and the storing, use, processing, and disclosure and protection of personal information, the scope of which are changing, subject to differing interpretations, and may be inconsistent among countries or conflict with other rules.
There are numerous federal and state laws, as well as regulations and industry guidelines and standards, regarding privacy and the collection, storing, use, processing, disclosure, and protection of personal information, the scope of which are continually changing, subject to differing interpretations, and may be inconsistent among countries and states or conflict with other laws, regulations, guidelines, and standards.
We are from time to time involved in, or may in the future be subject to, claims, suits, government investigations, and proceedings arising from our business, including actions with respect to intellectual property, privacy, consumer protection, information security, mortgage lending, real estate, environmental, data protection or law enforcement matters, tax matters, labor and employment, and commercial claims, as well as actions involving content generated by our customers, shareholder derivative actions, purported class action lawsuits, and other matters.
We are from time to time involved in, or may in the future be subject to, claims, suits, government investigations, and proceedings arising from our business, including actions with respect to intellectual property, privacy, consumer protection, Offerpad Solutions Inc. | 2023 Form 10-K | 21 information security, mortgage lending, real estate, environmental, data protection or law enforcement matters, tax matters, labor and employment, and commercial claims, as well as actions involving content generated by our customers, shareholder derivative actions, purported class action lawsuits, and other matters.
Identifying partners, and negotiating and documenting agreements with them, and establishing and maintaining good relationships requires significant time and resources. In addition, we rely on our relationships with multiple-listing services providers (“ MLS ”) in all our markets both as key data sources for our pricing and for listing our inventory for resale.
Identifying partners, and negotiating and documenting agreements with them, and establishing and maintaining good relationships requires significant time and resources. In addition, we rely on our relationships with multiple-listing services providers (“MLS”) in all our markets both as key data sources for our pricing and for listing our real estate inventory for resale.
For the years ended December 31, 2022 and 2021, approximately 49% and 61% of our revenue, respectively, was generated from our top five markets by revenue during 2022, which consisted of Phoenix, Atlanta, Tampa, Houston and Orlando.
For the years ended December 31, 2023 and 2022, approximately 51% and 49% of our revenue, respectively, was generated from our top five markets by revenue during 2023, which consisted of Phoenix, Tampa, Atlanta, Orlando, and Houston.
Pursuant to Section 404 of the Sarbanes-Oxley Act, we are required to evaluate and determine the effectiveness of our internal control over financial reporting, and our auditor is required, beginning with this Annual Report, to deliver an attestation report on the effectiveness of our internal control over financial reporting.
Pursuant to Section 404 of the Sarbanes-Oxley Act, we are required to evaluate and determine the effectiveness of our internal control over financial reporting, and our auditor is required to deliver an attestation report on the effectiveness of our internal control over financial reporting.
Expanding into new markets may prove to be challenging, as some markets may have very different characteristics than the markets we currently operate in, some of which may be unanticipated or unknown to us.
Expanding into new markets has proved and may continue to prove to be challenging, as some markets may have very different characteristics than the markets we currently operate in, some of which may be unanticipated or unknown to us.
As a result of this concentration, local and regional conditions in these markets – including those arising from COVID-19’s impacts – may differ significantly from prevailing conditions in the United States or other parts of the country. Any unforeseen events or circumstances that negatively affect these areas could materially adversely affect our revenues and profitability.
As a result of this concentration, local and regional conditions in these markets may differ significantly from prevailing conditions in the United States or other parts of the country. Any unforeseen events or circumstances that negatively affect these areas could materially adversely affect our revenues and profitability.
You may be unable to sell your securities unless a market can be established or sustained. Offerpad Solutions Inc. | 2022 Form 10-K | 36 The market price of our securities may be volatile.
You may be unable to sell your securities unless a market can be established or sustained. Offerpad Solutions Inc. | 2023 Form 10-K | 35 The market price of our securities may be volatile.
Our fraud detection processes and information security systems may not successfully detect all fraudulent activity by third parties aimed at our employees or customers, which could adversely affect our reputation and business results.
Our fraud detection processes and information security systems may not successfully detect all fraudulent activity by third parties aimed at our employees or customers, which could result in litigation or government action, and adversely affect our reputation and business results.
Offerpad Solutions Inc. | 2022 Form 10-K | 34 Our management has limited experience in operating a public company. Certain of our executive officers have limited experience in the management of a publicly traded company.
Offerpad Solutions Inc. | 2023 Form 10-K | 33 Our management has limited experience in operating a public company. Certain of our executive officers have limited experience in the management of a publicly traded company.
While our business is spread across 28 metropolitan markets in the United States as of December 31, 2022, a substantial amount of our revenue is generated in certain geographic markets.
While our business is spread across 25 metropolitan markets in the United States as of December 31, 2023, a substantial amount of our revenue is generated in certain geographic markets.
Under the Tax Act, as modified by the Coronavirus Aid, Relief, and Economic Security Act (the “ CARES Act ”), U.S. federal net operating loss carryforwards generated in taxable periods beginning after December 31, 2017, may be carried forward indefinitely, but the deductibility of such net operating loss carryforwards in taxable years beginning after December 31, 2020, is limited to 80% of taxable income.
Under the Tax Act, as modified by the CARES Act, U.S. federal net operating loss carryforwards generated in taxable periods beginning after December 31, 2017, may be carried forward indefinitely, but the deductibility of such net operating loss carryforwards in taxable years beginning after December 31, 2020, is limited to 80% of taxable income.
We could be subject to legal claims, government action, or harm to our reputation or incur significant remediation costs if we experience a security breach or our practices fail, or are seen as failing, to comply with our policies or with applicable laws concerning personally identifiable information.
We could be subject to legal claims, government investigations or actions, or harm to our reputation or incur significant remediation costs if we experience a security breach or our practices fail, or are seen as failing, to comply with our policies or with applicable laws concerning personal information.
These differences may result in greater pricing inaccuracies, as well as higher capital requirements, inventory hold times, repair costs and transaction costs that may result in those markets being less profitable for us than the ones in which we currently operate.
These differences may result in greater pricing uncertainty, as well as higher capital requirements, real estate inventory hold times, repair costs and transaction costs that may result in those markets being less profitable for us than those in which we currently operate in.
Increased interest costs have also reduced the amount of debt financing that our homes inventory can support.
Increased interest costs have also reduced the amount of debt financing that our real estate inventory can support.
We rely on licenses to use the intellectual property rights of third parties which are incorporated into our products and services. Failure to renew or expand existing licenses may require us to modify, limit or discontinue certain offerings, which could materially affect our business, financial condition and results of operations.
Offerpad Solutions Inc. | 2023 Form 10-K | 27 We rely on licenses to use the intellectual property rights of third parties which are incorporated into our products and services. Failure to renew or expand existing licenses may require us to modify, limit or discontinue certain offerings, which could materially affect our business, financial condition and results of operations.
If we are unable to develop adequate plans to ensure that our business functions continue to operate during and after a disaster, and successfully execute on those plans in the event of a disaster or emergency, our business and reputation would be harmed. Environmentally hazardous conditions may adversely affect us.
If we are unable to develop adequate plans to ensure that our business functions continue to operate during and after a disaster, and successfully execute on those plans in the event of a disaster or emergency, our business and reputation would be harmed. Offerpad Solutions Inc. | 2023 Form 10-K | 23 Environmentally hazardous conditions may adversely affect us.
Reductions in the availability of mortgage financing provided by government agencies, changes in government financing programs and an increase in mortgage interest rates has decreased and could continue to decrease our customers’ ability or desire to obtain financing and adversely affect our business or financial results.
Reductions in the availability of mortgage financing provided by government agencies and changes in government financing programs have decreased and could continue to decrease our customers’ ability or desire to obtain financing and adversely affect our business or financial results.
Specifically, we need to maintain a certain tangible net worth and liquidity minimums, and leverage maximums under certain of these facilities. These covenants may limit our operational flexibility or restrict our ability to engage in transactions that we believe would otherwise be in the best interests of our shareholders.
Specifically, we need to maintain a certain tangible net worth and liquidity minimums, and leverage maximums under certain of these facilities. These covenants may limit our operational flexibility or Offerpad Solutions Inc. | 2023 Form 10-K | 29 restrict our ability to engage in transactions that we believe would otherwise be in the best interests of our shareholders.
Despite measures designed to prevent, detect, address, and mitigate cybersecurity incidents, such incidents may occur to us or our third-party providers and, depending on their nature and scope, could potentially result in the misappropriation, destruction, corruption or unavailability of critical data and confidential or proprietary information (our own or that of third parties, including personal information of our customers and employees) and the disruption of business operations.
Despite measures designed to prevent, detect, address, and mitigate cybersecurity incidents, such incidents may occur to us or our third-party providers and, depending on their nature and scope, could potentially materially impact our Confidential Information (our own or that of third parties, including personal information of our customers and employees) and result in the disruption of business operations.
If alternate technology cannot be obtained or developed, we may not be able to offer certain functionality as part of our offerings, which could adversely affect our business, financial condition and results of operations. Offerpad Solutions Inc. | 2022 Form 10-K | 27 Our software is highly complex and may contain undetected errors.
If alternate technology cannot be obtained or developed, we may not be able to offer certain functionality as part of our offerings, which could adversely affect our business, financial condition and results of operations. Our software is highly complex and may contain undetected errors.
We could incur substantial losses and our business operations could be disrupted if we are unable to effectively identify, manage, monitor and mitigate financial risks, such as pricing risk, interest rate risk, liquidity risk, and other market-related Offerpad Solutions Inc. | 2022 Form 10-K | 21 risks, as well as operational and legal risks related to our business, assets and liabilities.
We could incur substantial losses and our business operations could be disrupted if we are unable to effectively identify, manage, monitor and mitigate financial risks, such as pricing risk, interest rate risk, liquidity risk, and other market-related risks, as well as operational and legal risks related to our business, assets and liabilities.
If we are unable to pay the outstanding balance of our debt obligations at maturity, the financing sources generally have the right to Offerpad Solutions Inc. | 2022 Form 10-K | 28 foreclose on the homes and other collateral securing that debt and to charge higher “default rates” of interest until the outstanding obligations are paid in full.
If we are unable to pay the outstanding balance of our debt obligations at maturity, the financing sources generally have the right to foreclose on the homes and other collateral securing that debt and to charge higher “default rates” of interest until the outstanding obligations are paid in full.
Assuming no change in the outstanding borrowings on our senior secured credit facilities, we estimate that a one percentage point increase in the Secured Overnight Financing Rate would have increased our annual interest expense by $4.9 million during the year ended December 31, 2022.
Assuming no change in the outstanding borrowings on our senior and mezzanine secured credit facilities, we estimate that a one percentage point increase in the Secured Overnight Financing Rate would have increased our annual interest expense by $2.6 million during the year ended December 31, 2023.
Risks Related to Our Liquidity and Capital Resources We utilize a significant amount of indebtedness in the operation of our business, and so our cash flows and operating results could be adversely affected by required payments of debt or related interest and other risks of our debt financing.
Offerpad Solutions Inc. | 2023 Form 10-K | 28 Risks Related to Our Liquidity and Capital Resources We utilize a significant amount of indebtedness in the operation of our business, and so our cash flows and operating results could be adversely affected by required payments of debt or related interest and other risks of our debt financing.
For example, the California Consumer Privacy Act (the “ CCPA ”), which took effect on January 1, 2020, imposes obligations and restrictions on companies regarding their collection, use, and sharing of personal information and provides new and enhanced data privacy rights to California residents. The CCPA imposes a severe statutory damages framework.
For example, the California Consumer Privacy Act (the “ CCPA ”), which took effect on January 1, 2020, imposes obligations and restrictions on companies regarding their collection, use, processing and disclosure of personal information and provides new and enhanced data privacy rights to California residents.
Persistent or pervasive fraudulent activity may cause customers and real estate partners to lose trust in us and decrease or terminate their usage of our products, or could result in financial loss, thereby harming our business and results of operations.
Additionally, fraudulent activity may harm our reputation, causing customers and real estate partners to lose trust in us and decrease or terminate their usage of our products, or could result in financial loss, thereby harming our business and results of operations.
We may be subject to additional local, state and federal laws and regulations governing residential real estate transactions, including those administered by the U.S. Department of Housing and Urban Development, and the states and municipalities in which we transact.
We may be subject to additional local, state and federal laws and regulations governing residential Offerpad Solutions Inc. | 2023 Form 10-K | 22 real estate transactions, including those administered by the U.S. Department of Housing and Urban Development, and the states and municipalities in which we transact.
Also, the insurance we maintain would likely not be adequate to cover our losses resulting from disasters or other business interruptions. Offerpad Solutions Inc. | 2022 Form 10-K | 23 As we grow our business, the need for business continuity planning and disaster recovery plans will grow in significance.
Also, the insurance we maintain would likely not be adequate to cover our losses resulting from disasters or other business interruptions. As we grow our business, the need for business continuity planning and disaster recovery plans will grow in significance.
Our competitors and other third parties may own or claim to own intellectual property relating to the real estate industry. In the future, third parties may claim that we are infringing on their intellectual property rights, and we may be found to be infringing such rights. Any claims or litigation, regardless of merit, could cause us to incur significant expenses.
In the future, third parties may claim that we are infringing on their intellectual property rights, and we may be found to be infringing such rights. Any claims or litigation, regardless of merit, could cause us to incur significant expenses.
However, it is possible that these obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or regulations, making enforcement, and thus compliance requirements, ambiguous, uncertain, and potentially inconsistent.
However, it is possible that these laws, regulations, policies, legal obligations, and industry guidelines and standards may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other laws, regulations, policies, legal obligations, and industry guidelines and standards, making enforcement, and thus compliance requirements, ambiguous, uncertain, and potentially inconsistent.
Offerpad Solutions Inc. | 2022 Form 10-K | 29 Even if we are successful in obtaining interest rate hedges, we cannot assure you that any hedging will adequately relieve the adverse effects of interest rate increases or that counterparties under these agreements will honor their obligations thereunder.
Even if we are successful in obtaining interest rate hedges, we cannot assure you that any hedging will adequately relieve the adverse effects of interest rate increases or that counterparties under these agreements will honor their obligations thereunder.
To the extent that we continue to generate taxable losses, unused losses will carry forward to offset future taxable income, if any, until such unused losses expire, if at all. As of December 31, 2022, the Company had federal and state net operating loss (“ NOL ”) carryforwards of $426.5 million.
To the extent that we continue to generate taxable losses, unused losses will carry forward to offset future taxable income, if any, until such unused losses expire, if at all. As of December 31, 2023, the Company had federal and state net operating loss (“NOL”) carryforwards of $735.0 million.
Failure to protect our trade secrets, know-how, proprietary applications, business processes and other proprietary information, could adversely affect the value of our technology and products. Our success and ability to compete depends in part on our intellectual property and our other proprietary business information.
Offerpad Solutions Inc. | 2023 Form 10-K | 26 Failure to protect our trade secrets, know-how, proprietary applications, business processes and other proprietary information, could adversely affect the value of our technology and products. Our success and ability to compete depends in part on our intellectual property and our other proprietary business information.
In addition, our net operating loss carryforwards are subject to review and possible adjustment by the IRS, and state tax authorities, and may be limited as a result of previous or future changes in our ownership.
Offerpad Solutions Inc. | 2023 Form 10-K | 30 In addition, our net operating loss carryforwards are subject to review and possible adjustment by the IRS, and state tax authorities, and may be limited as a result of previous or future changes in our ownership.
Our ability to recruit and retain a sufficient number of productive real estate agents is critical to maintaining and growing our business and providing an adequate level of service to our customers. We have employed, and will continue to employ, internal and independent contractor real estate agents for our brokerage business.
Our ability to recruit and retain a sufficient number of productive independent real estate agents is critical to maintaining and growing our business and providing an adequate level of service to our customers. We partner with independent contractor real estate agents for our brokerage business.
We have had a history of losses since our inception, and we may not achieve or maintain profitability in the future. We generated net income during the year ended December 31, 2021.
We have had a history of losses since our inception, and we may not achieve or maintain profitability in the future. With the exception of the year ended December 31, 2021, during which we generated net income, we have incurred net losses each year from inception, and may incur additional losses in the future.
We may be unsuccessful in launching new product and service offerings or pursuing expansion of existing product and service offerings into new markets, which could result in significant expense and may not achieve the desired results.
Offerpad Solutions Inc. | 2023 Form 10-K | 17 We may be unsuccessful in launching new product and service offerings or pursuing expansion of existing product and service offerings into new markets, which could result in significant expense and may not achieve the desired results.
In addition, we could become subject to investigations by Offerpad Solutions Inc. | 2022 Form 10-K | 35 the applicable stock exchange, the SEC or other regulatory authorities, which could require additional management attention and which could adversely affect our business.
In addition, we could become subject to investigations by the applicable stock exchange, the SEC or other regulatory authorities, which could require additional management attention and which could adversely affect our business.
In the event the value of such homes declines significantly, we could experience losses, which in the aggregate could be detrimental to our business and results of operations. Our business is dependent upon our ability to expeditiously sell inventory. Failure to expeditiously sell our inventory could have an adverse effect on our business, sales and results of operations.
In the event the value of such homes declines significantly, we could experience losses, which in the aggregate could be detrimental to our business and results of operations. Our business is dependent upon our ability to expeditiously sell real estate inventory.
In any event, we will not be able to grow as fast or at all if we do not, among other things: • increase the number of customers using our platform; • acquire sufficient inventory at an attractive cost and quality to meet the increasing demand for our homes; • successfully turnover inventory in an efficient manner; • increase customer conversion; • increase our market share within existing markets and expand into new markets; • increase our brand awareness; • obtain and retain adequate availability of financing sources; and • obtain necessary capital to meet our business objectives.
We may not be able to effectively manage these conditions and grow our business if we do not, among other things: • continue to increase the number of customers using our platform; • acquire sufficient real estate inventory at an attractive cost and quality to meet the demand for our homes; • successfully turnover real estate inventory in an efficient manner; • increase customer conversion; • increase our market share within existing markets and expand into new markets; • manage operating expenses; • increase our brand awareness; • retain adequate availability of financing sources; and • obtain necessary capital to meet our business objectives.
Congress, including another law in California where voters approved a ballot initiative from privacy rights advocates intending to augment and expand the CCPA, the California Privacy Rights Act (the “ CPRA ”), on November 3, 2020, which took effect on January 1, 2023 (with a look back to data collected, on or after January 1, 2022).
In California, voters approved a ballot initiative from privacy rights advocates that augments and expands the CCPA, the California Privacy Rights Act (the “ CPRA ”), on November 3, 2020, which took effect on January 1, 2023 (with a look back to data collected, on or after January 1, 2022).
Certain of our equityholders were in the past subject to lock-up restrictions that have expired as of the date of this Annual Report on Form 10-K. Now that these lock-up restrictions have expired, such equityholders are not restricted from selling shares of our Class A common stock held by them, other than by applicable securities laws.
Certain of our equityholders were in the past subject to lock-up restrictions that have expired. As a result, such equityholders are not restricted from selling shares of our Class A common stock held by them, other than by applicable securities laws.

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Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeIf one or more legal matters were resolved against us in a reporting period for amounts above management’s expectations, our financial condition, results of operations or cash flows for that reporting period could be adversely impacted, perhaps materially. Item 4. Mine Safety Disclosures. Not applicable. Offerpad Solutions Inc. | 2022 Form 10-K | 39 PART II
Biggest changeIf one or more legal matters were resolved against us in a reporting period for amounts above management’s expectations, our financial condition, results of operations or cash flows for that reporting period could be adversely impacted, perhaps materially. Item 4. Mine Safety Disclosures. Not applicable. Offerpad Solutions Inc. | 2023 Form 10-K | 38 PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 39 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 40 Item 6. [Reserved] 41 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 42 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 57 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 38 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 39 Item 6. [Reserved] 40 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 41 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 56 Item 8.
Removed
Financial Statements and Supplementary Data 58 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 88 Item 9A. Controls and Procedures 88 Item 9B. Other Information 90

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAll shares of our Class B common stock are owned by Brian Bair, the Chief Executive Officer and Founder of the Company, or entities controlled by Mr. Bair. There are no issued and outstanding shares of our Class C common stock.
Biggest changeClass B Common Stock Prior to the our 2023 annual meeting of stockholders on June 8, 2023 ( the “Annual Meeting”), there was no established public trading market for our outstanding shares of Class B common stock, all of which were owned by Brian Bair, our Chief Executive Officer and Founder, or entities controlled by Mr. Bair.
Because many of our shares of Class A common stock are held by banks, brokers and other financial institutions on behalf of shareholders, there are a greater number of shareholders represented by these registered holders.
Because many of our shares of Class A common stock and warrants are held by banks, brokers and other financial institutions on behalf of shareholders, there are a greater number of shareholders represented by these registered holders.
Dividends Our Class A and Class B common stock are entitled to dividends if and when any dividend is declared by our board of directors, subject to the rights of all classes of stock outstanding having priority rights to dividends. We have not paid any cash dividends on common stock to date.
Dividends Our Class A common stock is entitled to dividends if and when any dividend is declared by our board of directors, subject to the rights of all classes of stock outstanding having priority rights to dividends. We have not paid any cash dividends on common stock to date.
Purchase of Equity Securities We did not repurchase shares of our Class A common stock during the three months ended December 31, 2022.
Purchase of Equity Securities We did not repurchase shares of our Class A common stock during the three months ended December 31, 2023.
Offerpad Solutions Inc. | 2022 Form 10-K | 40 Stock Performance Graph The following graph illustrates the total return from September 1, 2021 through December 31, 2022, for (i) our Class A common stock, (ii) the Russell 2000 Index, and (iii) the NASDAQ Real Estate and Other Financial Services Index.
Offerpad Solutions Inc. | 2023 Form 10-K | 39 Stock Performance Graph The following graph illustrates the total return from September 1, 2021 through December 31, 2023, for (i) our Class A common stock, (ii) the Russell 2000 Index, and (iii) the NASDAQ Real Estate and Other Financial Services Index.
Any future determination to pay dividends will be made at the discretion of our board of directors and will depend on, among other things, our financial condition, results of operations, capital requirements, restrictions contained in future agreements and financing instruments, business prospects and such other factors as our board of directors may deem relevant. Sales of Unregistered Equity Securities None.
Any future determination to pay dividends will be made at the discretion of our board of directors and will depend on, among other things, our financial condition, results of operations, capital requirements, restrictions contained in future agreements and financing instruments, business prospects and such other factors as our board of directors may deem relevant.
Class B Common Stock There is no established public trading market for our Class B common stock. Holders of Record As of February 17, 2023, there were 43 registered holders of our Class A common stock, and four registered holders of our warrants that were issued in connection with the Business Combination.
Holders of Record Class A Common Stock As of February 16, 2024, there were 50 registered holders of our Class A common stock, and four registered holders of our warrants that were issued in connection with the Business Combination.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information for Common Stock Class A Common Stock Our Class A common stock and warrants are traded on the New York Stock Exchange (“NYSE”) under the symbols “OPAD” and “OPAD WS,” respectively.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Added
Market Information for Common Stock Class A Common Stock Our Class A common stock is traded on the New York Stock Exchange (“NYSE”) under the symbol “OPAD.” Prior to November 15, 2023, our warrants were traded on the NYSE under the symbol “OPAD WS.” On November 15, 2023, we received notice from the NYSE that our public warrants were no longer suitable for listing based on “abnormally low” price levels, pursuant to Section 802.01D of the NYSE Listed Company Manual, and that the NYSE Regulation has determined to commence proceedings to delist the warrants.
Added
The public warrants were later delisted from the NYSE and have subsequently been trading on the OTC Markets Group Pink Market under the symbol “OPADW.” Over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.
Added
Following the conclusion of the Annual Meeting, Mr. Bair effected a voluntary conversion of all shares of Class B common stock beneficially owned by him to an equivalent number of shares of Class A common stock (the “Voluntary Class B Conversion”). Following the Voluntary Class B Conversion, there were no issued and outstanding shares of our Class B common stock.
Added
Class B Common Stock and Class C Common Stock In connection with the Voluntary Class B Conversion, our board of directors approved amendments to our Certificate of Incorporation to, among other things, eliminate the authorization of and references to Class B common stock and Class C common stock, and make related technical, non-substantive and conforming changes.
Added
Upon the recommendation of the board of directors, our stockholders approved the amendments at the Annual Meeting. As a result of the amendments, we are no longer authorized to issue any shares of Class B Common Stock or Class C Common Stock.
Added
Sales of Unregistered Equity Securities Except as previously disclosed in our Current Report on Form 8-K filed with the SEC on February 1, 2023, no unregistered sales of our equity securities were made during the year ended December 31, 2023.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeOfferpad Solutions Inc. | 2022 Form 10-K | 50 Results of Operations 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 periods presented: Year Ended December 31, % of Revenue (in thousands, except percentages) 2022 2021 $ Change % Change 2022 2021 Revenue $ 3,952,314 $ 2,070,446 $ 1,881,868 90.9 % 100.0 % 100.0 % Cost of revenue 3,769,892 1,862,631 1,907,261 102.4 % 95.4 % 90.0 % Gross profit 182,422 207,815 (25,393 ) (12.2 )% 4.6 % 10.0 % Operating expenses: Sales, marketing and operating 238,931 146,872 92,059 62.7 % 6.0 % 7.1 % General and administrative 58,718 30,317 28,401 93.7 % 1.5 % 1.5 % Technology and development 12,090 10,860 1,230 11.3 % 0.3 % 0.5 % Total operating expenses 309,739 188,049 121,690 64.7 % 7.8 % 9.1 % (Loss) income from operations (127,317 ) 19,766 (147,083 ) (744.1 )% (3.2 )% 0.9 % Other income (expense): Change in fair value of warrant liabilities 23,522 2,464 21,058 854.6 % 0.6 % 0.1 % Interest expense (45,991 ) (15,848 ) (30,143 ) 190.2 % (1.2 )% (0.7 )% Other income, net 1,532 248 1,284 517.7 % 0.0 % 0.0 % Total other expense (20,937 ) (13,136 ) (7,801 ) 59.4 % (0.6 )% (0.6 )% (Loss) income before income taxes (148,254 ) 6,630 (154,884 ) * (3.8 )% 0.3 % Income tax expense (359 ) (170 ) (189 ) 111.2 % (0.0 )% (0.0 )% Net (loss) income $ (148,613 ) $ 6,460 $ (155,073 ) * (3.8 )% 0.3 % Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Revenue Revenue increased by $1,881.9 million, or 90.9%, to $3,952.3 million for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Biggest changeOfferpad Solutions Inc. | 2023 Form 10-K | 49 Results of Operations 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 periods presented: Year Ended December 31, % of Revenue (in thousands, except percentages) 2023 2022 $ Change % Change 2023 2022 Revenue $ 1,314,412 $ 3,952,314 $ (2,637,902 ) (66.7 )% 100.0 % 100.0 % Cost of revenue 1,244,231 3,769,892 (2,525,661 ) (67.0 )% 94.7 % 95.4 % Gross profit 70,181 182,422 (112,241 ) (61.5 )% 5.3 % 4.6 % Operating expenses: Sales, marketing and operating 116,558 238,931 (122,373 ) (51.2 )% 8.9 % 6.0 % General and administrative 50,091 58,718 (8,627 ) (14.7 )% 3.8 % 1.5 % Technology and development 7,945 12,090 (4,145 ) (34.3 )% 0.6 % 0.3 % Total operating expenses 174,594 309,739 (135,145 ) (43.6 )% 13.3 % 7.8 % Loss from operations (104,413 ) (127,317 ) 22,904 (18.0 )% (8.0 )% (3.2 )% Other income (expense) Change in fair value of warrant liabilities 68 23,522 (23,454 ) (99.7 )% 0.0 % 0.6 % Interest expense (18,859 ) (45,991 ) 27,132 (59.0 )% (1.4 )% (1.2 )% Other income, net 6,149 1,532 4,617 301.4 % 0.5 % 0.0 % Total other expense (12,642 ) (20,937 ) 8,295 (39.6 )% (0.9 )% (0.6 )% Loss before income taxes (117,055 ) (148,254 ) 31,199 (21.0 )% (8.9 )% (3.8 )% Income tax expense (163 ) (359 ) 196 (54.6 )% (0.0 )% (0.0 )% Net loss $ (117,218 ) $ (148,613 ) $ 31,395 (21.1 )% (8.9 )% (3.8 )% Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Revenue Revenue decreased by $2,637.9 million, or 66.7%, to $1,314.4 million for the year ended December 31, 2023 compared to the year ended December 31, 2022.
We have, however, provided limited non-recourse carve-out guarantees under our senior and mezzanine secured credit facilities for certain of the SPEs’ obligations in situations involving “bad acts” by an Offerpad entity and certain other limited circumstances that are generally under our control. Each senior secured facility contains eligibility requirements that govern whether a property can be financed.
We have, however, provided limited non-recourse carve-out guarantees under our senior and mezzanine secured credit facilities for certain of the SPEs’ obligations in situations involving “bad acts” by an Offerpad entity and certain other limited circumstances that are generally under our control. Each senior secured credit facility contains eligibility requirements that govern whether a property can be financed.
However, our ability to fund our working capital and capital expenditure requirements will depend in part on the residential real estate market conditions in the markets in which we operate and in the U.S. in general, and various other general economic, financial, competitive, legislative, regulatory and other conditions that may be beyond our control.
However, our ability to fund our working capital and capital expenditure requirements will depend in part on the residential real estate market conditions in the markets in which we operate and in the U.S. in general, and various other general economic, financial, competitive, legislative, regulatory, geopolitical and other conditions that may be beyond our control.
Residential Real Estate Industry Our business and operating results are impacted by the general economic conditions and the health of the U.S. residential real estate industry, particularly the single-family home resale market. Our business model depends on a high volume of residential real estate transactions throughout the markets in which we operate.
Residential Real Estate Industry Our business and operating results are impacted by the general economic conditions and the health of the U.S. residential real estate industry, particularly the single-family home resale market. Our business model primarily depends on a high volume of residential real estate transactions throughout the markets in which we operate.
The Investors included Brian Bair, our founder, chief executive officer and chairman of our board of directors; Roberto Sella, a member of our board of directors; First American Financial Corporation (“First American”), a holder of more than 10% of our outstanding Class A Common Stock; and Kenneth DeGiorgio, a member of our board of directors and chief executive officer of First American.
The Investors included Brian Bair, our founder, chief executive officer and chairman of our Board; Roberto Sella, a member of our Board; First American Financial Corporation (“First American”), a holder of more than 10% of our outstanding Class A Common Stock; and Kenneth DeGiorgio, a member of our Board and chief executive officer of First American.
Generally, the revenue and margin profiles of our ancillary products and services are different from our Express 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 Express cash offering service, but a higher margin.
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.
Also, because of our strategic approach to renovations, as well as the listing and buyer representation of our Flex listing service product, we believe a significant portion of the total addressable market is serviceable with our business model.
Also, because of our strategic approach to renovations, as well as the listing and buyer representation of our listing service product, we believe a significant portion of the total addressable market is serviceable with our business model.
If a customer chooses to list their home with our Offerpad Flex listing service, once a customer sells a home directly to a buyer using the Flex listing service, we earn a service fee, typically as a percentage of the sales price of the home.
If a customer chooses to list their home with our Offerpad listing service, once a customer sells a home directly to a buyer using the listing service, we earn a service fee, typically as a percentage of the sales price of the home.
Period. Offerpad was founded to create a better residential real estate experience by combining advanced technology solutions with fundamental industry expertise. Our Express cash offer service is our flagship offering, allowing customers to sell on their own schedule and without the hassle of showings, open houses, and aligning closing dates with the purchase date of their new home.
Offerpad was founded to create a better residential real estate experience by combining advanced technology solutions with fundamental industry expertise. Our cash offer service is our flagship offering, allowing customers to sell on their own schedule and without the hassle of showings, open houses, and aligning closing dates with the purchase date of their new home.
Net cash provided by operating activities during the year ended December 31, 2022 was also impacted by the $148.6 million net loss during the year, which included a $93.8 million non-cash inventory impairment loss as a result of the softening consumer demand for residential real estate, and a $23.5 million non-cash gain as a result of the fair value adjustment of the warrant liabilities.
Net cash provided by operating activities during the year ended December 31, 2022 was also impacted by the $148.6 million net loss during the year, which included a $93.8 million non-cash inventory valuation adjustment as a result of the softening consumer demand for residential real estate, and a $23.5 million non-cash gain as a result of the fair value adjustment of the warrant liabilities.
This includes interest expense recorded in prior periods in which the sale occurred. Our senior and mezzanine secured credit facilities are secured by our homes in inventory and drawdowns are made on a per-home basis at the time of purchase and are required to be repaid at the time the homes are sold.
This includes interest expense recorded in prior periods in which the sale occurred. Our senior and mezzanine secured credit facilities are secured by our homes in real estate inventory and drawdowns are made on a per-home basis at the time of purchase and are required to be repaid at the time the homes are sold.
A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended December 31, 2022. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth.
A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended December 31, 2023. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth.
We have invested significant resources into our underwriting and asset management systems. Our real estate operations team, including our acquisitions team, together with our software engineering and data science teams are responsible for underwriting accuracy, portfolio health, and workflow optimization.
We have invested significant resources into our underwriting and asset management systems. Our real estate operations team, including our pricing team, together with our software engineering and data science teams are responsible for underwriting accuracy, portfolio health, and workflow optimization.
Operating Leverage We utilize our technology and product teams to design systems and workflows to make our operations teams more efficient and able to support and scale with the business. Many positions are considered volume based, and as we continue to grow, we focus on developing more automation tools to gain additional leverage.
Operating Leverage We utilize our technology and product teams to design systems and workflows to make our operations teams more efficient and able to support and scale with the business. Many positions are considered volume based, and as our business grows, we focus on developing more automation tools to gain additional leverage.
Currently, revenues from home sales through our Express cash offer service are our primary source of revenue; however, we expect greater contribution from our Flex listing service offering as we drive expansion of this offering and from ancillary services in the future as our full product offering expands and matures.
Currently, revenues from home sales through our cash offer service are our primary source of revenue; however, we expect greater contribution from our listing service offering as we drive expansion of this offering and from ancillary products and services in the future as our full product offering expands and matures.
On the basis of this evaluation, we recorded a full valuation allowance against the net deferred tax assets as of December 31, 2022, 2021 and 2020.
On the basis of this evaluation, we recorded a full valuation allowance against the net deferred tax assets as of December 31, 2023, 2022, and 2021.
Our inventory impairment calculations contain uncertainties because they require management to make assumptions and apply judgment in determining the net realizable value for each home. Key assumptions used in estimating the net realizable value for each home include the projected home sales price and expected selling costs.
Our inventory valuation adjustment calculations contain uncertainties because they require management to make assumptions and apply judgment in determining the net realizable value for each home. Key assumptions used in estimating the net realizable value for each home include the projected home sales price and expected selling costs.
This section of this Form 10-K generally discusses 2022 items and the results of our operations for the year ended December 31, 2022 compared to the year ended December 31, 2021.
This section of this Form 10-K generally discusses 2023 items and the results of our operations for the year ended December 31, 2023 compared to the year ended December 31, 2022.
These types of costs include general and administrative expenses and certain marketing and information technology expenses, which grow at a slower pace than proportional to revenue growth. Inventory Financing Our business model requires significant capital to purchase inventory homes.
These types of costs include general and administrative expenses and certain marketing and information technology expenses, which grow at a slower pace than proportional to revenue growth. Real Estate Inventory Financing Our business model requires significant capital to purchase real estate inventory.
General and Administrative General and administrative expense consists primarily of headcount expenses, including salaries, benefits and stock-based compensation for our executive, finance, human resources, legal and administrative personnel. General and administrative expense also includes third-party professional service fees and rent expense.
General and Administrative General and administrative expenses consist primarily of headcount expenses, including salaries, benefits and stock-based compensation for our executive, finance, human resources, legal and administrative personnel. General and administrative expense also includes third-party professional service fees, insurance, and rent expense.
Although further developing these products and services will require significant investment, growing our current offerings and offering additional ancillary products and services, potentially including stand-alone remodel services, energy efficiency solutions, smart home technology, insurance, moving services, and home warranty services, we believe will strengthen our unit economics and allow us to better optimize pricing.
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.
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, although new market expansion typically generates lower initial margins as we begin operations that increase as we scale volumes.
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, although new market expansion typically generates lower initial margins as we begin operations that increase as we scale volumes.
A discussion of the year ended December 31, 2021 compared to the year ended December 31, 2020 has been reported previously in the 2021 Annual Report on Form 10-K, which was filed with the SEC on March 7, 2022, under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties.
A discussion of the year ended December 31, 2022 compared to the year ended December 31, 2021 has been reported previously in the 2022 Annual Report on Form 10-K, which was filed with the SEC on February 28, 2023, under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties.
Future financial performance improvements are expected to be driven by expanding unit level margins through initiatives such as: • Continued optimization of acquisition, renovation, and resale processes, as we expand our market footprint and increase penetration in existing markets; • Effectively increasing our Flex listing service business alongside the Express cash offer business, optimizing customer engagement and increasing conversion of requests for home purchases; and • Introducing and scaling additional ancillary services to complement our core Express cash offer and Flex listing service products.
Future financial performance improvements are expected to be driven by expanding unit level margins through initiatives such as: • Continued optimization of acquisition, renovation, and resale processes and strategies, as we increase our market penetration in existing markets; • Effectively increasing and expanding our listing service business alongside the cash offer business, optimizing customer and agent community engagement and increasing conversion of requests for home purchases; and • Introducing and scaling additional ancillary products and services to complement our core cash offer and listing service products.
We believe the scale and versatility of our platform will allow us to continue to expand into new markets, with our primary barriers to entry consisting largely of capital needed to expand operations and the tendency of consumers to adopt our real estate offerings.
We believe the scale and versatility of our platform should allow us to continue to expand into new markets, with our primary barriers to entry consisting largely of capital needed to expand operations, the tendency of consumers to adopt our real estate offerings and macroeconomic conditions.
Each Pre-funded Warrant was sold at a price of $0.5599 per Pre-funded Warrant and has an initial exercise price of $0.0001 per Pre-funded Warrant, subject to certain customary anti-dilution adjustment provisions. The exercise price for the Pre-funded Warrants can be paid in cash or on a cashless basis, and the Pre-funded Warrants have no expiration date.
Each Pre-funded Warrant was sold at a price of $0.5599 per Pre-funded Warrant and had an initial exercise price of $0.0001 per Pre-funded Warrant, subject to certain customary anti-dilution adjustment provisions. The exercise price for the Pre-funded Warrants could be paid in cash or on a cashless basis, and the Pre-funded Warrants had no expiration date.
In 2022, we estimate that we captured roughly 0.9% market share across our then active 28 markets. 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.
In 2023, we estimate that we captured roughly 0.5% market share across our then active 25 markets. 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.
Inventory We review inventory for impairment on a quarterly basis, or more frequently if events or changes in circumstances indicate that the carrying value of inventory may not be recoverable. We evaluate inventory for indicators that net realizable value is lower than cost at the individual home level.
Real Estate Inventory We review real estate inventory for valuation adjustments on a quarterly basis, or more frequently if events or changes in circumstances indicate that the carrying value of real estate inventory may not be recoverable. We evaluate real estate inventory for indicators that net realizable value is lower than cost at the individual home level.
Borrowings under the senior and mezzanine secured credit facilities and other senior secured debt are required to be repaid as the related real estate inventory is sold, which is expected to be within 12 months from December 31, 2022.
Borrowings under the senior and mezzanine secured credit facilities are required to be repaid as the related real estate inventory is sold, which is expected to be within 12 months from December 31, 2023.
Offerpad Solutions Inc. | 2022 Form 10-K | 48 We calculate Adjusted Net Income (Loss) as GAAP Net Income (Loss) adjusted for the change in fair value of warrant liabilities. We define Adjusted Net Income (Loss) Margin as Adjusted Net Income (Loss) as a percentage of revenue.
Offerpad Solutions Inc. | 2023 Form 10-K | 47 We calculate Adjusted Net Income (Loss) as GAAP Net Income (Loss) adjusted for the change in fair value of warrant liabilities. We define Adjusted Net Income (Loss) Margin as Adjusted Net Income (Loss) as a percentage of revenue.
As of December 31, 2022, we had other purchase obligations of $6.5 million, with $5.8 million payable within 12 months. Operating Leases We have operating lease arrangements consisting of our corporate headquarters in Chandler, Arizona and field office facilities in most of the metropolitan markets in which we operate in the United States.
As of December 31, 2023, we had other purchase obligations of $7.3 million, with $5.8 million payable within 12 months. Operating Leases We have operating lease arrangements consisting of our existing corporate headquarters in Chandler, Arizona and field office facilities in most of the metropolitan markets in which we operate in the United States.
Offerpad Solutions Inc. | 2022 Form 10-K | 49 Technology and Development Technology and development expense consists of headcount expenses, including salaries, benefits and stock-based compensation expense for employees and contractors engaged in the design, development, and testing of website applications, mobile applications, and software development. Technology and development expenses are charged to operations as incurred.
Offerpad Solutions Inc. | 2023 Form 10-K | 48 Technology and Development Technology and development expenses consist of headcount expenses, including salaries, benefits and stock-based compensation expense for employees and contractors engaged in the design, development, and testing of website applications, mobile applications, and software development. Technology and development expenses are charged to operations as incurred.
Adjusted Gross Profit / Margin We calculate Adjusted Gross Profit as gross profit under GAAP adjusted for (1) net inventory impairment plus (2) interest expense associated with homes sold in the presented period and recorded in cost of revenue.
Adjusted Gross Profit / Margin We calculate Adjusted Gross Profit as gross profit under GAAP adjusted for (1) net real estate inventory valuation adjustment plus (2) interest expense associated with homes sold in the presented period and recorded in cost of revenue.
Our effective tax rate for each of the years ended December 31, 2022 and December 31, 2021 differed from the federal statutory rate of 21% primarily due to the valuation allowance recorded on our deferred tax assets, state taxes and stock-based compensation.
Our effective tax rate for each of the years ended December 31, 2023 and December 31, 2022 differed from the federal statutory rate of 21% primarily due to the valuation allowance recorded on our deferred tax assets and state taxes.
Market Penetration in Existing Markets Residential real estate is one of the largest industries, with roughly $2.3 trillion in value of homes transacted in 2022 in the United States, and is highly fragmented with over 100,000 real estate brokerages, according to the National Association of Realtors (NAR).
Market Penetration in Existing Markets 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).
We utilize a mix of Offerpad employed foreman and crew members as well as third-party specialists to execute necessary renovations. Our renovation strategy is focused on maximizing return through accretive upgrades and ensuring the home is in list-ready condition and is continually refined based on market level trends. We actively manage our vendor network through quality, cost, and timeliness evaluations.
We utilize a mix of Offerpad employed foreman and crew members as well as third-party specialists to execute necessary renovations. Our renovation strategy is focused on maximizing return through accretive upgrades and ensuring the home is in list-ready condition and is continually refined based on market level trends.
Income Tax Expense We recorded income tax expense of $0.4 million and $0.2 million during the years ended December 31, 2022 and 2021, respectively, and our effective tax rate was (0.2)% and 2.6% for the respective periods.
Income Tax Expense We recorded income tax expense of $0.2 million and $0.4 million during the years ended December 31, 2023 and 2022, respectively, and our effective tax rate was an expense of (0.1)% and (0.2)% for the respective periods.
We do so by including revenue generated from homes sold (and ancillary services) in the period and only the expenses that are directly attributable to such home sales, even if such expenses were recognized in prior periods, and excluding expenses related to homes that remain in Offerpad Solutions Inc. | 2022 Form 10-K | 46 inventory as of the end of the period presented.
We do so by including revenue generated from homes sold (and ancillary services) in the period and only the expenses that are directly attributable to such home sales, even if such expenses were recognized in prior periods, and excluding expenses related to homes that remain in inventory as of the end of the period presented.
Home Purchase Commitments As of December 31, 2022, we were under contract to purchase 98 homes for an aggregate purchase price of $24.9 million, all of which are expected to close within 12 months. Other Purchase Obligations We have other purchase obligations which principally include commitments relating to insurance, marketing, information technology and administration services.
Home Purchase Commitments As of December 31, 2023, we were under contract to purchase 500 homes for an aggregate purchase price of $135.1 million, all of which are expected to close within 12 months. Other Purchase Obligations We have other purchase obligations which principally include commitments relating to insurance, information technology, administration services, and marketing.
Offerpad Solutions Inc. | 2022 Form 10-K | 43 Home Acquisition and Renovation Once the offer is received and reviewed by the customer, if they choose to proceed, a purchase contract is generated and signed. If the customer is represented by a third-party agent, we work directly with such agent in addition to paying the agent’s fee.
Home Acquisition and Renovation Once the offer is received and reviewed by the customer, if they choose to proceed, a purchase contract is generated and signed. If the customer is represented by a third-party agent, we work directly with such agent in addition to paying the agent’s fee.
If the home fits our eligible criteria, an Offerpad employee will reach out within 24 hours via email, phone, or text to deliver and discuss Offerpad’s cash purchase offer and review any other services that may be of interest to the customer, including our Flex listing and buyer representation services and our mortgage solutions offerings.
If the home fits our eligible criteria, the customer is contacted within 24 hours via email, phone, or text to deliver and discuss Offerpad’s cash purchase offer and review any other services that may be of interest to the customer, including our listing and buyer representation services and our mortgage solutions offerings.
We generated net income during the year ended December 31, 2021. However, we have incurred losses during the year ended December 31, 2022 and each year from inception through December 31, 2020, and may incur additional losses in the future. We continued to invest in the development and expansion of our operations.
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 may incur additional losses in the future. We have continued to invest in the development and expansion of our operations.
(2) Inventory impairment – prior period is the inventory valuation adjustments recorded in prior periods associated with homes that sold in the period presented.
(2) Real estate inventory valuation adjustment – prior period is the real estate inventory valuation adjustments recorded in prior periods associated with homes that sold in the period presented.
Our acquisition and resale teams work closely to ensure market level trends are captured and anticipated in pricing decisions. The ultimate goal during the resale process is to maximize return on investment when considering pricing and holding periods.
Our acquisition and Offerpad Solutions Inc. | 2023 Form 10-K | 42 resale teams work closely to ensure market level trends are captured and anticipated in pricing decisions. The ultimate goal during the resale process is to maximize return on investment when considering pricing and holding periods.
When evidence exists that the net realizable value of inventory is lower than its cost, the difference is recognized as impairment in cost of revenue and the related inventory is adjusted to its net realizable value.
When evidence exists that the net realizable value of real estate inventory is lower than its cost, the difference is recognized as a real estate inventory valuation adjustment in cost of revenue and the related real estate inventory is adjusted to its net realizable value.
For all other homes, if the carrying value exceeds the expected sale price less expected selling costs, the carrying value of these homes are adjusted to the expected sale price less expected selling costs. We recorded inventory impairments of $93.8 million, $2.8 million and $3.2 million during the years ended December 31, 2022, 2021 and 2020, respectively.
For all other homes, if the carrying value exceeds the expected sale price less expected selling costs, the carrying value of these homes are adjusted to the expected sale price less expected selling costs. We recorded real estate inventory valuation adjustments of $8.9 million, $93.8 million, and $2.8 million during the years ended December 31, 2023, 2022, and 2021, respectively.
Additionally, as we continue to grow the business, we expect to be able to gain operating leverage on portions of our cost structure that are more fixed in nature as opposed to purely variable.
Additionally, in periods when our business is growing, we expect to be able to gain operating leverage on portions of our cost structure that are more fixed in nature as opposed to purely variable.
Ancillary Products and Services Core to our long-term strategy is a suite of offerings to meet the unique needs of our customers. As such, we view adding both additional products and services as well as additional product specific features as critical to supporting this strategy.
These services represented less than 1% of our total revenue in both 2023 and 2022. Ancillary Products and Services Core to our long-term strategy is a suite of offerings to meet the unique needs of our customers. As such, we view adding both additional products and services as well as additional product specific features as critical to supporting this strategy.
Contribution Profit / Margin We calculate Contribution Profit as Adjusted Gross Profit, minus (1) direct selling costs incurred on homes sold during the presented period, minus (2) holding costs incurred in the current period on homes sold during the period recorded in sales, marketing, and operating, minus (3) holding costs incurred in prior periods on homes sold in the current period recorded in sales, marketing, and operating, plus (4) other income which is primarily comprised of interest income earned on our cash and cash equivalents and income earned from the sale of certain fixed assets.
Contribution Profit / Margin We calculate Contribution Profit as Adjusted Gross Profit, minus (1) direct selling costs incurred on homes sold during the presented period, minus (2) holding costs incurred in the current period on homes sold during the period recorded in sales, marketing, and operating, minus (3) holding costs incurred in prior periods on homes sold in the current period recorded in sales, marketing, and operating, plus (4) other income, net which is primarily composed of interest income earned on our cash and cash equivalents and fair value adjustments of derivative financial instruments.
When we resell a home, the proceeds are used to reduce the corresponding outstanding balance under the related senior and mezzanine secured revolving credit facilities.
When we resell a home, the proceeds are used to reduce the corresponding outstanding balance under the related senior and mezzanine secured revolving credit facilities. Mezzanine Secured Credit Facilities In addition to the senior secured credit facilities, we use mezzanine secured credit facilities which are structurally and contractually subordinated to the related senior secured credit facilities.
The following table presents a reconciliation of our Adjusted Net Income (Loss) and Adjusted EBITDA to our GAAP Net Income (Loss), which is the most directly comparable GAAP measure, for the periods indicated: Year Ended December 31, (in thousands, except percentages, unaudited) 2022 2021 Net (loss) income (GAAP) $ (148,613 ) $ 6,460 Change in fair value of warrant liabilities (23,522 ) (2,464 ) Adjusted net (loss) income $ (172,135 ) $ 3,996 Adjusted net (loss) income margin (4.4 )% 0.2 % Adjustments: Interest expense 45,991 15,848 Amortization of capitalized interest (1) 12,660 6,294 Income tax expense 359 170 Depreciation and amortization 1,022 523 Amortization of stock-based compensation 8,307 3,079 Adjusted EBITDA $ (103,796 ) $ 29,910 Adjusted EBITDA margin (2.6 )% 1.4 % (1) Amortization of capitalized interest represents all interest related costs, including senior and mezzanine secured interest related costs, incurred on homes sold in the period presented that were capitalized and expensed in cost of sales at the time of sale.
The following table presents a reconciliation of our Adjusted Net Income (Loss) and Adjusted EBITDA to our GAAP Net Income (Loss), which is the most directly comparable GAAP measure, for the periods indicated: Year Ended December 31, (in thousands, except percentages, unaudited) 2023 2022 Net loss (GAAP) $ (117,218 ) $ (148,613 ) Change in fair value of warrant liabilities (68 ) (23,522 ) Adjusted net loss $ (117,286 ) $ (172,135 ) Adjusted net loss margin (8.9 )% (4.4 )% Adjustments: Interest expense 18,859 45,991 Amortization of capitalized interest (1) 7,234 12,660 Income tax expense 163 359 Depreciation and amortization 728 1,022 Amortization of stock-based compensation 7,915 8,307 Adjusted EBITDA $ (82,387 ) $ (103,796 ) Adjusted EBITDA margin (6.3 )% (2.6 )% (1) Amortization of capitalized interest represents all interest related costs, including senior and mezzanine interest related costs, incurred on homes sold in the period presented that were capitalized and expensed in cost of sales at the time of sale.
The aggregate gross proceeds to us was approximately $90.0 million, which we intend to use for general corporate purposes, including working capital.
The aggregate gross proceeds to us was approximately $90.0 million, which is being used for general corporate purposes, including working capital.
The decrease in gross profit margin was primarily due to a decrease in the difference between the average home resale price and the average home acquisition price during the year ended December 31, 2022 compared to the year ended December 31, 2021.
The increase in gross profit margin was partially offset by a decrease in the difference between the average home resale price and the average home acquisition price during the year ended December 31, 2023 compared to the year ended December 31, 2022.
Typically, the greatest number of transactions occur in the spring and summer, with fewer transactions occurring in the fall and winter. Our financial results, including revenue, margins, inventory, and financing costs, have historically had seasonal characteristics generally consistent with the residential real estate market, a trend we expect to continue in the future, subject to the market conditions discussed above.
Our financial results, including revenue, margins, real estate inventory, and financing costs, have historically had seasonal characteristics generally consistent with the residential real estate market, a trend we expect to continue in the future, subject to the market conditions discussed above.
Customers also have the ability to utilize Offerpad’s renovation advance program to complete strategic upgrades to maximize the resale value of the home. • Offerpad Home Loans (“OPHL”) : We provide access to mortgage services through our in-house mortgage solution, OPHL, or through a third-party lending partner. • Bundle Rewards : The Offerpad Bundle Rewards program allows customers to receive multiple discounts when selling and buying a home with Offerpad, and by obtaining their home loan with OPHL. • Title and Escrow : To deliver title and escrow closing services, we have a national relationship with a leading title and escrow company, through which we are able to leverage our size and scale to provide exceptional service with favorable economics.
Below is a summary of our current ancillary products and services: • Title and Escrow : We have a national relationship with a leading title and escrow company through which we are able to leverage our size and scale to provide exceptional title and escrow closing services with favorable economics. • Offerpad Home Loans (“OPHL”) : We provide access to mortgage services through our in-house mortgage solution, OPHL, or through a third-party lending partner. • Bundle Rewards : The Offerpad Bundle Rewards program allows customers to receive multiple discounts when selling and buying a home with Offerpad, and by obtaining their home loan with OPHL.
Overview Our Business Offerpad is a customer-centric, home buying and selling platform that provides customers with the ultimate home transaction experience, offering convenience, control, certainty, and value.
Overview Our Business Offerpad is a customer-centric, home buying and selling platform that provides customers with the ultimate home transaction experience, offering simplicity, peace of mind, freedom, and value.
(7) Represents holding costs incurred in prior periods on homes sold in the period presented and expensed to Sales, marketing, and operating on the Consolidated Statements of Operations. (8) Other income principally represents interest income earned on our cash and cash equivalents and income earned from the sale of certain fixed assets.
(7) Represents holding costs incurred in prior periods on homes sold in the period presented and expensed to Sales, marketing, and operating on the Consolidated Statements of Operations. (8) Other income, net principally represents interest income earned on our cash and cash equivalents and fair value adjustments of derivative financial instruments.
These actions resulted in a significant reduction in our home acquisition pace to allow us to manage overall inventory growth, which led to the average holding period of homes sold increasing to 101 days during 2022, which is consistent with our expected average inventory holding period and our historical norm.
These actions resulted in a significant reduction in our home acquisition pace to allow us to manage overall real estate inventory growth. This, in turn, led to the average holding period of homes sold increasing to 101 days during 2022.
We believe our cash on hand, together with proceeds from the resale of homes and cash from future borrowings available under each of our existing credit facilities or the entry into new financing Offerpad Solutions Inc. | 2022 Form 10-K | 52 arrangements (including the Private Placement (as defined below)), will be sufficient to meet our short-term working capital and capital expenditure requirements for at least the next twelve months.
We believe our cash on hand, together with proceeds from the resale of homes and cash from future borrowings available under each of our existing credit facilities, or the entry into new debt financing arrangements or the issuance of equity instruments, will be sufficient to meet our short-term working capital and capital expenditure requirements for at least the next twelve months.
Gross profit margin was 4.6% for the year ended December 31, 2022 compared to 10.0% for the year ended December 31, 2021.
Gross profit margin was 5.3% for the year ended December 31, 2023 compared to 4.6% for the year ended December 31, 2022.
Offerpad Solutions Inc. | 2022 Form 10-K | 54 Covenants for Senior Secured Credit Facilities and Mezzanine Secured Credit Facilities The secured credit facilities include customary representations and warranties, covenants and events of default. Financed properties are subject to customary eligibility criteria and concentration limits.
Covenants for Senior Secured Credit Facilities and Mezzanine Secured Credit Facilities Our secured credit facilities include customary representations and warranties, covenants and events of default. Financed properties are subject to customary eligibility criteria and concentration limits.
Other Income, Net Other income, net during the year ended December 31, 2022 principally represents interest income earned on our cash and cash equivalents. Other income, net during the year ended December 31, 2021 principally represents a gain from the disposal of fixed assets.
Other income, net during the year ended December 31, 2022 principally represents interest income earned on our cash and cash equivalents.
This includes the Offerpad website and mobile app, local MLS, and syndication across online real estate portals. Prior to listing the home for sale, an Offerpad Asset Manager will reevaluate the current market and comparable properties using the same underwriting technology as is used in the buying process to price the home accordingly.
Prior to listing the home for sale, an Offerpad Asset Manager will reevaluate the current market and comparable properties using the same underwriting technology as is used in the buying process to price the home accordingly.
These costs are accumulated in real estate inventory during the property holding period and charged to cost of revenue under the specific identification method when the property is sold.
These costs are accumulated in real estate inventory up until the home is ready for resale, and then charged to cost of revenue under the specific identification method when the property is sold.
Investing Activities Net cash used in investing activities was $1.1 million and $11.7 million for the years ended December 31, 2022 and 2021, respectively. Net cash used in investing activities during 2022 represents purchases of property and equipment.
Net cash used in investing activities during 2022 represents purchases of property and equipment. Financing Activities Net cash used in financing activities was $324.0 million and $358.5 million for the years ended December 31, 2023 and 2022, respectively.
Cost of Revenue Cost of revenue consists of the initial home purchase costs, renovation costs, holding costs and interest incurred prior to the date the home is ready for resale and real estate inventory impairments, if any.
Cost of Revenue Cost of revenue consists of the initial home purchase costs, renovation costs, holding costs and interest incurred during the renovation period, prior to the listing date and real estate inventory valuation adjustments, if any.
This transaction volume affects all of the ways that we generate revenue, including our ability to acquire new homes and generate associated fees, and our ability to sell homes that we own.
This transaction volume affects substantially all of the ways that we generate revenue, including our ability to acquire new homes and generate associated fees, and our ability to sell homes that we own. The residential real estate market conditions were mixed over the course of 2023.
Further, our listed homes are in market-ready and move-in ready condition following the repairs and renovations we conduct. Historically, we have been able to manage our portfolio risk in part by our ability to manage holding periods for our inventory. Traditionally, resale housing pricing moves gradually through cycles; therefore, shorter inventory holding periods limit pricing exposure.
Further, our listed homes are typically in market-ready and move-in ready condition following the repairs and renovations we conduct. Historically, we have been able to manage our portfolio risk in part by our ability to manage holding periods for our real estate inventory.
Private Placement On January 31, 2023, we entered into a pre-funded warrants subscription agreement (the “Subscription Agreement”) with the investors named therein (the “Investors”) pursuant to which we sold and issued to the Investors an aggregate of 160,742,959 pre-funded warrants (the “Pre-funded Warrants”) to purchase shares (the “Pre-funded Warrant Shares”) of Class A Common Stock (the “Private Placement”).
Pre-Funded Warrants During January 2023, we entered into a pre-funded warrants subscription agreement with the investors named therein (the “Investors”) pursuant to which we sold and issued to the Investors an aggregate of 160.7 million pre-funded warrants (the “Pre-funded Warrants”) to purchase shares of our Class A Common Stock.
Inventory financing is a key enabler to our growth and we rely on our non-recourse asset-backed financing facilities, which primarily consist of senior and mezzanine secured credit facilities to finance our home purchases.
Inventory financing is a key enabler to our growth and we rely on our non-recourse asset-backed financing facilities, which primarily consist of senior and mezzanine secured credit facilities to finance our home purchases. The loss of adequate access to these types of facilities, or the inability to maintain these types of facilities on favorable terms, would impair our performance.
Unit Economics We view Contribution Margin and Contribution Margin after Interest (see “—Non-GAAP Financial Measures”) as key performance indicators for unit economic performance, which are currently primarily driven by our Express cash offer transactions.
Our ancillary products and services represented less than 1% of our total revenue in both 2023 and 2022. Unit Economics We view Contribution Margin and Contribution Margin after Interest (see “—Non-GAAP Financial Measures”) as key performance indicators for unit economic performance, which are currently primarily driven by our cash offer transactions.
We believe that Adjusted Gross Profit, Contribution Profit, and Contribution Profit After Interest are useful financial measures for investors as they are used by management in evaluating unit level economics and operating performance across our markets. Each of these measures is intended to present the economics related to homes sold during a given period.
We believe that Adjusted Gross Profit, Contribution Profit, and Contribution Profit After Interest are useful financial measures for investors as they are used by management in evaluating unit level economics and operating performance across our markets.
As we expand further into our existing markets, launch new markets, and develop a wide range of new ancillary services, we look forward to bringing our mission of providing your best way to buy and sell a home to even more homeowners and prospective home purchasers across the country.
As we expand further into our existing markets, launch new markets, and develop a wide range of new ancillary products and services, we look forward to bringing our mission of delivering the best home buying and selling experience to even more homeowners and prospective home purchasers across the country. Current Economic Conditions and Health of the U.S.
Offerpad Solutions Inc. | 2022 Form 10-K | 47 The following table presents a reconciliation of our Adjusted Gross Profit, Contribution Profit and Contribution Profit After Interest to our gross profit, which is the most directly comparable GAAP measure, for the periods indicated: Year Ended December 31, (in thousands, except percentages and homes sold, unaudited) 2022 2021 Gross profit (GAAP) $ 182,422 $ 207,815 Gross margin 4.6 % 10.0 % Homes sold 10,635 6,373 Gross profit per home sold $ 17.2 $ 32.6 Adjustments: Inventory impairment - current period (1) 58,413 1,205 Inventory impairment - prior period (2) (1,205 ) (160 ) Interest expense capitalized (3) 12,660 6,294 Adjusted gross profit $ 252,290 $ 215,154 Adjusted gross margin 6.4 % 10.4 % Adjustments: Direct selling costs (4) (97,381 ) (48,066 ) Holding costs on sales - current period (5)(6) (8,342 ) (4,262 ) Holding costs on sales - prior period (5)(7) (918 ) (214 ) Other income (8) 1,532 248 Contribution profit $ 147,181 $ 162,860 Contribution margin 3.7 % 7.9 % Homes sold 10,635 6,373 Contribution profit per home sold $ 13.8 $ 25.6 Adjustments: Interest expense capitalized (3) (12,660 ) (6,294 ) Interest expense on homes sold - current period (9) (32,022 ) (10,228 ) Interest expense on homes sold - prior period (10) (3,737 ) (468 ) Contribution profit after interest $ 98,762 $ 145,870 Contribution margin after interest 2.5 % 7.0 % Homes sold 10,635 6,373 Contribution profit after interest per home sold $ 9.3 $ 22.9 (1) Inventory impairment – current period is the inventory valuation adjustments recorded during the period presented associated with homes that remain in inventory at period end.
Offerpad Solutions Inc. | 2023 Form 10-K | 46 The following table presents a reconciliation of our Adjusted Gross Profit, Contribution Profit and Contribution Profit After Interest to our gross profit, which is the most directly comparable GAAP measure, for the periods indicated: Year Ended December 31, (in thousands, except percentages and homes sold, unaudited) 2023 2022 Gross profit (GAAP) $ 70,181 $ 182,422 Gross margin 5.3 % 4.6 % Homes sold 3,674 10,635 Gross profit per home sold $ 19.1 $ 17.2 Adjustments: Real estate inventory valuation adjustment - current period (1) 837 58,413 Real estate inventory valuation adjustment - prior period (2) (58,125 ) (1,205 ) Interest expense capitalized (3) 7,234 12,660 Adjusted gross profit $ 20,127 $ 252,290 Adjusted gross margin 1.5 % 6.4 % Adjustments: Direct selling costs (4) (35,225 ) (97,381 ) Holding costs on sales - current period (5)(6) (3,357 ) (8,342 ) Holding costs on sales - prior period (5)(7) (2,166 ) (918 ) Other income, net (8) 6,149 1,532 Contribution (loss) profit $ (14,472 ) $ 147,181 Contribution margin (1.1 )% 3.7 % Homes sold 3,674 10,635 Contribution (loss) profit per home sold $ (3.9 ) $ 13.8 Adjustments: Interest expense capitalized (3) (7,234 ) (12,660 ) Interest expense on homes sold - current period (9) (15,289 ) (32,022 ) Interest expense on homes sold - prior period (10) (13,924 ) (3,737 ) Contribution (loss) profit after interest $ (50,919 ) $ 98,762 Contribution margin after interest (3.9 )% 2.5 % Homes sold 3,674 10,635 Contribution (loss) profit after interest per home sold $ (13.9 ) $ 9.3 (1) Real estate inventory valuation adjustment – current period is the real estate inventory valuation adjustments recorded during the period presented associated with homes that remain in real estate inventory at period end.
These Offerpad Solutions Inc. | 2022 Form 10-K | 56 estimates are subjective and are affected by factors such as changes in economic conditions and changes in operating performance.
These estimates are subjective and are affected by factors such as changes in economic conditions and changes in operating performance.
For individual homes or portfolios of homes under contract to sell as of the impairment assessment date, if the carrying value exceeds the contract price less expected selling costs, the carrying value of these homes are adjusted to the contract price less expected selling costs.
For individual homes or portfolios of homes under contract to sell as of the real estate inventory valuation assessment date, if the carrying value exceeds the contract price less expected selling costs, the carrying value of these homes are adjusted to the Offerpad Solutions Inc. | 2023 Form 10-K | 55 contract price less expected selling costs.
Additionally, the average resale home price increased by 14% from $325,000 in the year ended December 31, 2021 to $371,000 in the year ended December 31, 2022.
Additionally, the average resale home price decreased by 4.3% from $371,000 in the year ended December 31, 2022 to $355,000 in the year ended December 31, 2023.
Net cash used in financing activities during 2022 primarily consisted of $3,540.5 million of repayments of credit facilities and other debt, which was partially offset by $3,178.0 million of borrowings from credit facilities and other debt. This net decrease in credit facility funding of $362.5 million was directly related to the decrease in financed inventory during 2022.
Net cash used in financing activities during 2023 primarily consisted of $1,286.8 million of repayments of credit facilities and other debt, which was partially offset by $875.6 million of borrowings from credit facilities and other debt. This net decrease in credit facility funding of $411.2 million was directly related to the decrease in financed real estate inventory during the period.
Credit Facilities and Other Debt As of December 31, 2022, we had aggregate outstanding principal amounts on our senior and mezzanine secured credit facilities of $489.3 million and $92.4 million, respectively, and $89.0 million on our other senior secured debt.
Credit Facilities and Other Debt As of December 31, 2023, we had aggregate outstanding principal amounts on our senior and mezzanine secured credit facilities of $222.9 million and $36.5 million, respectively.
We view this metric as an important measure of business performance, as it captures gross margin performance isolated to homes sold in a given period and provides comparability across reporting periods. Adjusted Gross Profit helps management assess performance across the key phases of processing a home (acquisitions, renovations, and resale) for a specific resale cohort.
We define Adjusted Gross Margin as Adjusted Gross Profit as a percentage of revenue. We view this metric as an important measure of business performance, as it captures gross margin performance isolated to homes sold in a given period and provides comparability across reporting periods.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeWe had outstanding borrowings on our senior secured credit facilities and other senior secured debt of $578.3 million as of December 31, 2022, of which, $489.3 million was outstanding on our senior secured credit facilities. Borrowings under our senior secured credit facilities accrue interest at a floating rate based on a SOFR reference rate plus a margin.
Biggest changeWe had outstanding borrowings on our senior and mezzanine secured credit facilities of $222.9 million and $36.5 million, respectively, as of December 31, 2023, and there were no amounts outstanding under our other senior secured debt arrangement. Borrowings under these debt arrangements accrue interest at a floating rate based on a SOFR reference rate plus a margin.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. We are exposed to economic and other market risks, which principally includes changes in interest rates. Interest Rate Risk We are subject to market risk associated with changing interest rates within our variable rate senior secured credit facilities and other senior secured debt.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. We are exposed to economic and other market risks, which principally includes changes in interest rates. Interest Rate Risk We are subject to market risk associated with changing interest rates within our variable rate senior and mezzanine secured credit facilities, and other secured debt arrangements.
As of December 31, 2022, our exposure to changes in interest rates within these debt arrangements is principally associated with the Secured Overnight Financing Rate (“SOFR”).
As of December 31, 2023, our exposure to changes in interest rates for these debt arrangements is principally associated with the Secured Overnight Financing Rate (“SOFR”).
Assuming no change in the outstanding borrowings on our senior secured credit facilities, we estimate that a one percentage point increase in SOFR would have increased our annual interest expense by $4.9 million during the year ended December 31, 2022.
Assuming no change in the outstanding borrowings on our senior and mezzanine secured credit facilities, we estimate that a one percentage point increase in SOFR would have increased our annual interest expense by $2.6 million during the year ended December 31, 2023.
Assuming no change in the outstanding borrowings on our senior secured credit facilities as of December 31, 2021, we estimate that a one percentage point increase in LIBOR would have increased our annual interest expense by $8.3 million during the year ended December 31, 2021. Offerpad Solutions Inc. | 2022 Form 10-K | 57
Assuming no change in the outstanding borrowings on our senior secured credit facilities as of December 31, 2022, we estimate that a one percentage point increase in SOFR would have increased our annual interest expense by $4.9 million during the year ended December 31, 2022. Offerpad Solutions Inc. | 2023 Form 10-K | 56
As of December 31, 2021, our exposure to changes in interest rates within our variable rate senior secured credit facilities and other senior secured debt was principally associated with the London Interbank Offered Rate (“LIBOR”).
As of December 31, 2022, our exposure to changes in interest rates within our variable rate senior secured credit facilities and other senior secured debt was principally associated with SOFR.
Added
Increases in interest rates generally increase the interest expense incurred on borrowings under such credit facilities and arrangements. From time to time, we may use derivative financial instruments as economic hedges to manage risks that are principally associated with interest rate fluctuations.

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