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What changed in Opendoor Technologies Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Opendoor Technologies 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.

+460 added−445 removedSource: 10-K (2024-02-15) vs 10-K (2023-02-23)

Top changes in Opendoor Technologies Inc.'s 2023 10-K

460 paragraphs added · 445 removed · 351 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

81 edited+15 added−8 removed46 unchanged
Biggest changeThis centralization has also enabled us to shift an increasing amount of back-office work to our offshore teams, which we believe will help deliver structural cost improvements over time. We have also established a network of more than 1,000 trade partners and local service providers that use our proprietary technology to complete home repairs and maintenance.
Biggest changeLeveraging a combination of industry best practices and big data, we can fully underwrite these lower risk homes via centralized teams in order to provide sellers fast and frictionless final offers. This centralization has also enabled us to shift an increasing amount of back-office work to our offshore teams, which we believe will help deliver structural cost improvements over time.
These customers face an additional set of challenges to line up their home purchase with their sale: • Contingencies. Many Americans are reluctant to sell or cannot purchase their next home until they know with certainty what they can afford for their next home. Few Americans can qualify for two mortgages and few have enough money for two down payments.
These customers face an additional set of challenges to line up their home purchase with their sale: • Contingencies. Many Americans are reluctant to sell or cannot purchase their next home until they know with certainty what they can afford. Few Americans can qualify for two mortgages and few have enough money for two down payments.
Paul, Nashville, New York-New Jersey, Northern Colorado, Oklahoma City, Orlando, Phoenix, Portland, Prescott, Raleigh-Durham, Reno, Richmond, Riverside, Sacramento, Saint Louis, Salt Lake City, San Antonio, San Diego, San-Francisco-Bay Area, Southwest Florida, Tampa, Tucson, and Washington, DC. We believe we are still in the early stages of the digital transformation of real estate.
Paul, Nashville, New York-New Jersey, Northern Colorado, Oklahoma City, Orlando, Phoenix, Portland, Prescott, Raleigh-Durham, Richmond, Riverside, Sacramento, Saint Louis, Salt Lake City, San Antonio, San Diego, San-Francisco-Bay Area, Southwest Florida, Tampa, Tucson, and Washington, DC. We believe we are still in the early stages of the digital transformation of real estate.
These entities are subject to stringent state and federal laws and regulations, including, but not limited to, the Real Estate Settlement Procedures Act (“RESPA”) and those administered by applicable state departments of real estate, banking, insurance and consumer services. These entities are also subject to the scrutiny of state and federal government agencies as licensed businesses as noted above.
These entities are subject to stringent state and federal laws and regulations, including, but not limited to, the Real Estate Settlement Procedures Act (“RESPA”) and those administered by applicable state departments of real estate, banking, and consumer services. These entities are also subject to the scrutiny of state and federal government agencies as licensed businesses as noted above.
These laws and regulations are generally intended to protect the privacy and security of personal information, including customer Social Security numbers and credit card information that is collected, processed and transmitted. These laws also can restrict our use of this personal information for other commercial purposes.
These laws and regulations are generally intended to protect the privacy and security of personal information, including customer Social Security numbers and credit card information that is collected, processed and transmitted. These laws also can restrict our use of this personal information for other commercial purposes, including advertising.
We believe that the quality and scale of information we utilize in our inventory management decisions and our ability to manage these decisions across a scaled, diversified portfolio provides us with a structural advantage over individual sellers or agents in the traditional home selling process. • Our operations across 53 markets and a range of price and home types allow us to benefit from significant diversification effects.
We believe that the quality and scale of information we utilize in our inventory management decisions and our ability to manage these decisions across a scaled, diversified portfolio provides us with a structural advantage over individual sellers or agents in the traditional home selling process. • Our operations across 50 markets and a range of price and home types allow us to benefit from significant diversification effects.
Finally, there is an approximately 20% chance the contract falls through between signing and closing (based on average multiple listing services (“MLS”) contract fall-through rates in our markets in 2022), forcing the home seller to start the entire process all over again. Additionally, we estimate over two-thirds of home sellers are also home buyers.
Finally, there is an approximately 20% chance the contract falls through between signing and closing (based on average multiple listing services (“MLS”) contract fall-through rates in our markets in 2023), forcing the home seller to start the entire process all over again. Additionally, we estimate over two-thirds of home sellers are also home buyers.
The seller often needs to get the home “sale ready.” This preparation, including cleaning, staging and any necessary upgrades, typically involves a lot of guesswork, time and money. • List the home. A home typically needs to be listed for around 30 days on average before it goes into contract. • Host open houses and home visits .
The seller often needs to get the home “sale ready.” This preparation, including cleaning, staging and any necessary upgrades, typically involves a lot of guesswork, time and money. • List the home. A home typically needs to be listed for over 30 days on average before it goes into contract. • Host open houses and home visits .
These buyers often have to submit offers contingent on selling their current home, putting them at a disadvantage versus other buyers. • The “double move”. Alternatively, homeowners can sell their current home, move into a rental or hotel, and then buy a new home, forcing them to move twice and bear those costs.
These buyers often have to submit offers contingent on selling their current home, putting them at a disadvantage versus other buyers. • The “double move.” Alternatively, homeowners can sell their current home, move into a rental or hotel, and then buy a new home, forcing them to move twice and bear those costs.
After the offer is accepted, the buyer conducts an inspection, which often forces the seller to renegotiate the offer or fix issues, increasing the homeowner’s costs and potentially delaying closing. • Wait for closing. Once the contract is signed, it still takes over 30 days on average to close.
After the offer is accepted, the buyer conducts an inspection, which often forces the seller to renegotiate the offer or fix issues, increasing the homeowner’s costs and potentially delaying closing. • Wait for closing. Once the contract is signed, it still takes over 40 days on average to close.
As a result, we are currently subject to a variety of, and may in the future become subject to additional, federal, state and local statutes and regulations in various jurisdictions (as well as judicial and administrative decisions and state common law), which are subject to change at any time, including laws regarding the real estate and mortgage industries, settlement services, mobile and internet based businesses and other businesses that rely on advertising, as well as data privacy, consumer protection, and employment laws.
As a result, we are currently subject to a variety of, and may in the future become subject to additional, federal, state and local statutes and regulations in various jurisdictions (as well as judicial and administrative decisions and state common law), which are subject to change at any time, including laws regarding the real estate industry, settlement services, mobile and internet based businesses and other businesses that rely on advertising, as well as data privacy, consumer protection, and employment laws.
While residential real estate markets are subject to fluctuations, as with any market, we believe we are well-positioned to manage our risk exposure due to the following: • A critical component of our business model is managing inventory exposure and balancing growth, margin and risk.
While residential real estate markets are subject to fluctuations, as with any market, we believe we are well-positioned to manage our risk exposure due to the following: • A critical component of our business model is managing inventory exposure and balancing growth, margin, risk, liquidity, and capital.
Our values reflect how we will deliver on our goal to build a once in a generation company and include a focus on the customer, a culture of frugality, continuous invention, and ruthless execution against results: • Start and end with the customer. We invent, build and execute to improve the lives of our customers.
Our values reflect how we will deliver on our goal to build a once in a generation company and include a focus on the customer, a culture of efficiency, continuous invention, and ruthless execution against results: • Start and end with the customer. We invent, build and execute to improve the lives of our customers.
There are over three million licensed real estate agents in the United States, who on average complete less than four transactions per year and many of whom do not solely work in real estate. This can lead to an inconsistent and frustrating experience for consumers looking for guidance in what is typically the largest financial decision of their lives.
There are over three million licensed real estate agents in the United States, who each complete fewer than four transactions on average per year, and many of whom do not solely work in real estate. This can lead to an inconsistent and frustrating experience for consumers looking for guidance in what is typically the largest financial decision of their lives.
With this in mind, we have invested in developing technology that enables virtualization, centralization, and automation in order to reduce cost, increase speed and improve quality of execution. Our proprietary construction management technology enables us to drive efficiencies across all home servicing functions, tying together pre-acquisition assessments, pricing, repair scoping, centralized back-office operations, and renovation project management.
With this in mind, we have invested in developing technology that enables virtualization, centralization, and automation to reduce cost, increase speed and improve quality of execution. Our proprietary construction management technology enables us to drive efficiencies across all home servicing functions, tying together pre-acquisition assessments, pricing, repair scoping, centralized back-office operations, renovation project management, and listed home maintenance.
Our systems and processes facilitate the centralization of certain processes that previously required local labor, which provides staffing flexibility, cost economies, training and quality enhancements, and faster turnaround times, all of which result in a superior customer experience.
Our systems and processes facilitate the centralization of certain processes that previously required local labor, which provides staffing flexibility, cost economies, training and quality enhancements, and faster turnaround times, all of which result in a superior home product and customer experience.
In order to finalize our offer, we conduct a combination of virtual and in-person home assessments to verify the condition of the home and determine what kind of repairs and home quality improvements will need to be performed after we acquire the home.
In order to finalize our offer, we conduct a combination of virtual and in-person home assessments to verify the condition of the home and determine what kind of repairs and home quality improvements may need to be performed after we acquire the home.
Using our website, sellers can receive a preliminary offer online. We then conduct a home assessment to verify the home information and finalize the offer, taking into consideration the home’s condition. Sellers can then select their preferred closing date and close electronically (where permitted). 5 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC.
Using our website or mobile app, sellers can receive a preliminary offer online. We then conduct a home assessment to verify the home information and finalize the offer, taking into consideration the home’s condition. Sellers can then select their preferred closing date and close electronically (where permitted). 5 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC.
Through our various subsidiaries, we also buy and sell homes, provide real estate brokerage, title insurance and settlement services, and provide other product offerings, which results in us receiving or facilitating transmission of personally identifiable information. This information is increasingly subject to legislation and regulation in the United States.
Through our various subsidiaries, we also buy and sell homes, provide real estate brokerage, title insurance and settlement services, and provide other product offerings, which results in us receiving or facilitating transmission of personal information. This information is increasingly subject to legislation and regulation in the United States.
Since our inception, we have invested in our research and data science teams, modeling capabilities, and systematized tooling to gather, aggregate, and synthesize an expanding catalog of proprietary, hyperlocal data in order to enhance and automate pricing decisions. We have also acquired third party data to improve our pricing models and forecast quality.
Since our inception, we have invested in our research and data science teams, modeling capabilities, and systematized tooling to gather, aggregate, and synthesize an expanding catalog of proprietary, hyper-local data in order to enhance and automate pricing decisions. We have also acquired third-party data to improve our pricing models and forecast quality.
Advancements in model sophistication and the integration of systematic modeling and human insights have accelerated our feedback loops, such that our pricing system can dynamically adjust to leading market indicators and human insights, and react to macro- and micro-economic conditions. • Pricing competitiveness. Our unique data works in concert with our pricing algorithms.
Advancements in model sophistication and the integration of systematic modeling and human insights have accelerated our feedback loops, such that our pricing system can dynamically adjust and react to macro- and micro-economic conditions. • Pricing competitiveness. Our unique data works in concert with our pricing algorithms.
Before the seller can list, they must find a qualified agent. Over 80% of sellers contact only one real estate agent before listing. • Prepare the home for listing.
Before the seller can list, they must find a qualified agent. Approximately 80% of sellers contact only one real estate agent before listing. • Prepare the home for listing.
We manage and measure our inventory performance by acquisition cohort and by market, and our pricing models can incorporate granular, relative demand signals to optimize pricing and sell-through across the portfolio. Our resale models, in conjunction with our pricing team, are designed to enable realized margins within our targets while maintaining appropriate transaction velocity and inventory portfolio health.
We manage and measure our inventory performance by listing cohort and by market, and our pricing models can incorporate granular, relative demand signals to optimize pricing and sell-through across the portfolio. Our resale models, in conjunction with input from our pricing team, are designed to enable realized margins within our targets while maintaining appropriate transaction velocity and inventory portfolio health.
Since our initial market launch in Phoenix in 2014, we have expanded across the United States and operated in 53 markets as of December 31, 2022: Albuquerque, Asheville, Atlanta, Austin, Birmingham, Boise, Boston, Charleston, Charlotte, Chattanooga, Cincinnati, Cleveland, Colorado Springs, Columbia, Columbus, Corpus Christi, Dallas-Fort Worth, Denver, Detroit, Greensboro-Winston, Greenville, Houston, Indianapolis, Jacksonville, Kansas City, Killeen, Knoxville-Morristown, Las Vegas, Los Angeles, Miami, Minneapolis-St.
Since our initial market launch in Phoenix in 2014, we have expanded across the United States and operated in 50 markets as of December 31, 2023: Albuquerque, Atlanta, Austin, Birmingham, Boston, Charleston, Charlotte, Chattanooga, Cincinnati, Cleveland, Colorado Springs, Columbia, Columbus, Corpus Christi, Dallas-Fort Worth, Denver, Detroit, Greensboro-Winston, Greenville, Houston, Indianapolis, Jacksonville, Kansas City, Killeen, Knoxville-Morristown, Las Vegas, Los Angeles, Miami, Minneapolis-St.
The Problem The traditional process of buying or selling a home is a lengthy and stressful experience for both the seller and buyer. For the approximately 90% of United States sellers that list their home on the market using an agent, this is what their experience typically looks like: • Find a listing agent.
The Problem The traditional process of selling or buying a home is a lengthy and stressful experience for both the seller and buyer. For over 85% of United States sellers that list their home on the market using an agent, this is what their experience typically looks like: • Find a listing agent.
Our final offer, inclusive of purchase price, service fee, and repair charge, provides the homeowner with more certainty and transparency as to their expected sale proceeds, while removing the hassle of doing any repairs to get the home “sale ready.” • 3P Product.
Our final offer, inclusive of purchase price, service fee, and repair charge, provides the homeowner with more certainty and transparency as to their expected sale proceeds, while removing the hassle of doing any repairs to get the home “sale ready.” • List with Opendoor.
As more consumers start their home journey with Opendoor, we expect this prospective customer base to continue to expand over time. Competition The U.S. housing market is highly competitive and fragmented, with over five million residential real estate transactions per year. We view our primary competition as the 99% of transactions that are done offline.
As more consumers start their home journey with Opendoor, we expect this prospective customer base to continue to expand over time. Competition The U.S. housing market is highly fragmented, with over four million residential real estate transactions per year. We view our primary competition as the approximately 99% of transactions that are done offline.
Item 1. Business. Mission Our mission is to power life’s progress, one move at a time. Our Company We are a leading e-commerce platform for residential real estate transactions. In 2014, we founded Opendoor to reinvent one of life’s most important transactions and make it possible to buy, sell, and move at the tap of a button.
Item 1. Business. Mission Our mission is to power life’s progress, one move at a time. Our Company We are the largest digital platform for residential real estate transactions. In 2014, we founded Opendoor to reinvent one of life’s most important transactions and make it possible to buy, sell, and move at the tap of a button.
Transaction velocity and hold times are important inputs to how we manage our inventory exposure and overall risk.
Transaction velocity and hold times are important inputs into how we manage our inventory exposure and overall risk.
Launched in 2014, sellers utilize our 1P product offering to sell their home directly to us and we resell the home to a home buyer. By selling to Opendoor, homeowners can avoid the stress of open houses, home repairs, overlapping mortgages and the uncertainty that can come with listing a home on the open market.
Launched in 2014, sellers utilize our core product offering to sell their home directly to us and we resell the home to a home buyer. By selling to Opendoor, homeowners can avoid the stress of open houses, home repair coordination, overlapping mortgages, and the uncertainty that can come with listing a home on the open market.
To create our home offers, we algorithmically produce both an estimated offer price and an assessment of our confidence level in that estimate, and we then further validate that estimate with a value and risk assessment, including a combination of virtual and in person assessments of the home, as well as additional review from our in-house pricing analysts, to finalize the offer.
To create our final home offers, we algorithmically produce both an estimated valuation and an assessment of our confidence level in that estimate, and we then further validate that estimate with a combination of virtual and in person assessments of the home, as well as additional review from our in-house pricing analysts, to finalize the offer.
The principal purposes of our equity incentive plans are to attract, retain, and motivate selected employees, consultants, and directors through the granting of stock-based compensation awards. 10 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC. Technology Our business is driven by data and technology at all stages of the home buying and selling process.
The principal purposes of our equity incentive plans are to attract, retain, and motivate selected employees, consultants, and directors through the granting of stock-based compensation awards. Technology Our business is driven by data and technology at all stages of the home buying and selling process.
While the majority of home buyers browse for homes online, the transaction itself is still largely offline, requiring real estate agents to access homes and requiring in-person closings. The COVID-19 pandemic catalyzed an increase in demand for digital-first experiences with consumers prioritizing simplicity and certainty.
While the majority of home buyers browse for homes online, the transaction itself is still largely offline, requiring consumers to engage with real estate agents to access homes and 4 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC. requiring in-person closings. The COVID-19 pandemic catalyzed an increase in demand for digital-first experiences with consumers prioritizing simplicity and certainty.
In 2022 alone, more than five million existing homes were sold, representing over $1.9 trillion in transactions. Additionally, with approximately two-thirds of Americans living in a home they own, housing is the single largest consumer expenditure in the United States, ahead of transportation, food, insurance, and healthcare.
In 2023 alone, more than four million existing homes were sold, representing approximately $1.6 trillion in transactions. Additionally, with approximately two-thirds of Americans living in a home they own, housing is the single largest consumer expenditure in the United States, ahead of transportation, food, insurance, and healthcare.
We also use the Investor Relations page of our website for purposes of compliance with Regulation FD and as a routine channel for distribution of important information, including blogs, news releases, analyst presentations, financial information and corporate governance practices.
We also use the Investor Relations page of our website for purposes of compliance with Regulation FD and as a 12 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC. routine channel for distribution of important information, including blogs, news releases, analyst presentations, financial information and corporate governance practices.
Nearly 30% of sellers who listed or sold their homes have previously entered their home address on 6 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC. Opendoor.com across our active markets, which suggests that our registered user base is a powerful source of future sellers that we can use to drive our future growth.
Nearly 25% of sellers who listed or sold their homes have previously entered their home address on Opendoor.com across our active markets, which suggests that our registered user base is a powerful source of future sellers that we can use to drive our future growth.
Since our inception, we have prioritized investment in our pricing capabilities across our home acquisition processes and our forecasting and resale systems. Our pricing function focuses on ensuring we are providing competitive offers to customers while managing acquisition volumes and resale policy decisions to meet our underwriting and risk management objectives.
Since our inception, we have prioritized investment in our pricing capabilities across our home acquisition processes and our forecasting and resale systems. Our pricing function focuses on ensuring we are providing competitive offers to customers while managing acquisition volumes and resale policy decisions to meet our underwriting and risk management objectives. 7 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC.
Intellectual Property We rely on trademarks, domain names, patents, copyrights, trade secrets, contractual provisions and restrictions on access and use to establish and protect our proprietary rights. As of December 31, 2022, we had 14 trademark registrations and 6 patent registrations.
Intellectual Property We rely on trademarks, domain names, patents, copyrights, trade secrets, contractual provisions and restrictions on access and use to establish and protect our proprietary rights. As of December 31, 2023, we had 11 trademark registrations and 8 patent registrations.
A traditional home sale requires countless decisions and an average of six intermediaries, often brings unexpected costs, and takes approximately three months from start to finish. Ultimately, the consumer is left dissatisfied with a broken, disjointed experience. We streamline the process of buying and selling a home into a seamless digital experience that is simple and certain.
A traditional home sale requires countless decisions and an average of six intermediaries, often brings unexpected costs, and takes approximately three months from start to finish. Ultimately, the consumer is left dissatisfied with a broken, disjointed experience. Opendoor transforms the home selling and buying process into a simple and certain online experience.
This compares favorably to the traditional listing process, which can include a broker fee of 5% to 6%, depending on location, and a number of additional costs, such as resale concessions, inspection costs, staging costs, double mortgage payments on two homes, and additional moving and storage costs. Many of these expenses may be unforeseen by the homeowner at the outset.
Our offering compares favorably to the traditional listing process, which can include a broker fee and a number of additional costs, such as resale concessions, inspection costs, staging costs, mortgage payments on two homes, and additional moving and storage costs. Many of these expenses may be unforeseen by the homeowner at the outset.
We typically ask for a repair charge that relates to our assessment of home condition and what it will require to get the home “sale ready.” We have developed purpose-built software to guide home assessment workflows and collect over 150 unique data points on average regarding a home’s condition and quality.
We typically ask for a repair charge that relates to our assessment of home condition and what it will require to get the home “sale ready” based on the expectations of buyers in the market. We have developed purpose-built software to guide home assessment workflows and collect over 150 unique data points on average regarding a home’s condition and quality.
Each component of our real estate business and transaction experience has been purpose-built to delight our customers through a streamlined, flexible and vertically-integrated platform. We have reimagined the traditionally inefficient and labor-intensive processes required to purchase, repair, and resell each home.
Each component of our real estate business and transaction experience has been purpose-built to delight our customers through a streamlined, digital-first, flexible, and vertically-integrated platform. We have reimagined the traditionally inefficient and labor-intensive processes required to purchase, repair, and resell a home, and we have designed our technology and processes to do so at scale.
Importantly, we have achieved this growth while continuing to delight customers, maintaining an annual average Net Promoter Score of nearly 80 from our sellers in 2022.
Importantly, we have achieved this growth while continuing to delight customers, maintaining an average Net Promoter Score of nearly 80 from our sellers since 2021.
Real estate is migrating online. Consumers are shifting their spend online and demanding digital-first experiences for greater efficiency, certainty and speed. They are increasingly comfortable transacting online across retail, food and 4 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC. transportation, and they now expect similar experiences in real estate.
Real estate is migrating online. Consumers are shifting their spend online and demanding digital-first experiences for greater efficiency, certainty and speed. They are increasingly comfortable transacting online across retail, food and transportation, and they now expect similar experiences in real estate.
For customers who sell directly to us, we charge a service fee. We also charge the seller for expected repairs and home quality improvements that relate to our assessment of home condition and the expectations of buyers in the market. Our service fee is set at 5% across all markets.
For customers who sell directly to us, we charge a service fee. We also charge the seller for expected repairs and home quality improvements that relate to our assessment of home condition and the expectations of buyers in the market.
In order to provide the broad range of products and services that we offer customers, certain of our subsidiaries maintain real estate brokerage, title insurance and escrow, property and casualty insurance, and general contractor licenses, and we may in the future apply for additional licenses as our business grows and develops.
Risk Factors — Risks Related to Our Intellectual Property and Technology . ” To provide the broad range of products and services that we offer customers, certain of our subsidiaries maintain real estate brokerage, title insurance and escrow, and general contractor licenses, and we may in the future apply for additional licenses as our business grows and develops.
Since launch, customers have demonstrated their desire for our digital, on-demand real estate solution with over 215,000 homes bought and sold by Opendoor across the United States. In 2022, we sold over 39,000 homes and generated $15.6 billion in revenue, the latter of which represents a compound annual growth rate of 85% since 2017.
Since launch, customers have demonstrated their desire for our digital, on-demand real estate solution with over 246,000 homes bought and sold by Opendoor across the United States. In 2023, we sold over 18,700 homes and generated $6.9 billion in revenue, the latter of which represents a compound annual growth rate of over 45% since 2017.
This further limits the exposure of our inventory portfolio to macro market changes. 8 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC. Low Cost Transaction Platform We continue to invest in having an agile, low cost platform, which allows us to provide more competitive offers to home sellers and adapt to changes in macro conditions.
This further limits the exposure of our inventory portfolio to macro market changes. Efficient Digital Platform We continue to invest in having an agile, low-cost platform, which allows us to provide more competitive offers to home sellers and adapt to changes in macro conditions.
We assume good intentions and treat feedback as a gift. • 1% Better Every Day. We value a growth mindset and operate from a place of humility. We are energized by constantly improving. • Startup mentality. We move fast, operate with urgency, and have a bias towards action without sacrificing quality. We are relentlessly resourceful. • One Team, One Dream.
We assume good intentions and treat feedback as a gift. 10 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC. • 1% Better Every Day. We value a growth mindset and operate from a place of humility. We are energized by constantly improving. • Startup mentality. We move fast, operate with urgency, and have a bias towards action without sacrificing quality.
In addition, we employ sophisticated resale pricing management systems that is designed to allow us to optimize sell-through and margin using real-time, local market demand information, including down to an individual home level.
In addition, we employ sophisticated resale pricing management systems that are designed to allow us to optimize sell- 8 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC. through and margin using real-time, local market demand information, including down to an individual home level.
In addition, OS National LLC, and its subsidiary, OSN Escrow, are licensed as escrow agents in seven states and OS National LLC is authorized to conduct the business of title insurance in five additional states that do not require entity and/or individual licensing. • Opendoor Home Loans LLC holds mortgage banking/lending licenses in five states. • Digital Opendoor Insurance Services LLC holds insurance producer licenses for property and casualty lines in nine states. • Open Exchange Brokerage LLC, holds real estate brokerage licenses in 15 states. • Tremont Realty LLC (dba Opendoor Connect), holds a real estate brokerage license in Texas.
In addition, OS National LLC, and its subsidiary, OSN Escrow, are licensed as escrow agents in seven states and OS National LLC is authorized to conduct the business of title insurance in five additional states that do not require entity and/or individual licensing. • Open Exchange Brokerage LLC, holds real estate brokerage licenses in 18 states. • Tremont Realty LLC (dba Opendoor Connect), holds a real estate brokerage license in Texas.
Over the coming years, we are dedicated to building a managed marketplace, where more consumers will be able to transact directly with simplicity, certainty and control over the entire process. Market Overview Residential real estate is a massive offline market.
We are dedicated to building a digital, one-stop shop for buyers and sellers of residential real estate, where more consumers will be able to transact directly with simplicity, certainty and control over the entire process. Market Overview Residential real estate is a massive offline market.
(formerly known as Open Listings Co.), collectively, hold real estate brokerage licenses in all our markets and certain other states. • OS National LLC, and its subsidiaries, OSN Texas LLC and OSN Alabama LLC, are licensed as title agents in 27 states.
As of December 31, 2023: • Opendoor Brokerage LLC and Opendoor Brokerage Inc., collectively, hold real estate brokerage licenses in all our markets and certain other states. • OS National LLC, and its subsidiaries, OSN Texas LLC and OSN Alabama LLC, are licensed as title agents in 27 states.
None of our employees are currently represented by a labor organization or a party to any collective bargaining. Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing, and integrating our existing and additional employees.
Employees As of December 31, 2023, we employed 1,982 individuals, including 1,711 in the United States. None of our employees are currently represented by a labor organization or a party to any collective bargaining. Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing, and integrating our existing and additional employees.
Our Business Model The vast majority of our revenue and margins today are generated by our core 1P product offering, where we acquire homes directly from sellers and resell those homes to buyers.
Our Business Model The vast majority of our revenue and margins today are generated by our core product offering, where we acquire homes directly from sellers and resell those homes to buyers. We also provide additional services to home sellers and home buyers, including title and escrow services, List with Opendoor, and Opendoor Marketplace.
Our superpower is a diverse community that combines technology, operational excellence, talent and respect. We work through teams and care for each other professionally and personally. We honor and respect our diverse workforce and actively work to ensure everyone feels represented. • Results matter. We focus on outputs and outcomes and hold ourselves accountable to hitting ambitious goals.
We are relentlessly resourceful. • One Team, One Dream. Our superpower is a diverse community that combines technology, operational excellence, talent and respect. We work through teams and care for each other professionally and personally. We honor and respect our diverse workforce and actively work to ensure everyone feels represented. • Results matter.
During the process, the seller will typically host dozens of strangers walking through their home, and deal with the hassle of cleaning up and clearing out, often on short notice and during inconvenient times. • Receive an offer.
During the process, the seller will typically host dozens of strangers walking through their home, and deal with the hassle of cleaning up and clearing out, often on short notice and during inconvenient times. • Receive an offer. Almost 30% of home sellers reduce their asking price at least once, while approximately 20% of sellers offer incentives to attract buyers.
In addition to earned media and online real estate partnerships with leading industry brands, we leverage a diverse range of channels and platforms 9 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC. within paid advertising, including paid online channels, direct mail, television, radio, and outdoor advertising.
Marketing We utilize a diversified, multichannel approach in marketing, with a focus on efficient growth. In addition to earned media and online real estate partnerships with leading industry brands, we leverage a diverse range of channels and platforms within paid advertising, including paid online channels, direct mail, television, radio, social media, and outdoor advertising.
For a discussion of the various risks we face from regulation and compliance matters, see “Item 1A.
We are subject to compliance audits of our operations by many of these authorities. For a discussion of the various risks we face from regulation and compliance matters, see “Item 1A.
Of the $1.9 trillion residential real estate transactions in 2022, iBuyers (companies that use technology to facilitate these transactions) captured only 1%. The current landscape is highly fragmented. Today, approximately 90% of residential real estate transactions in the United States involve an agent.
Of the $1.6 trillion residential real estate transactions in 2023, iBuyers (companies that use technology to price homes, acquire properties, and facilitate real estate transactions) captured less than 1%. The current landscape is highly fragmented. Today, over 85% of residential real estate transactions in the United States involve an agent.
Regulatory bodies include the Consumer Financial Protection Bureau (“CFPB”), the Federal Trade Commission (“FTC”), the Department of Justice (“DOJ”), the Department of Housing and Urban Development (“HUD”), and various state licensing authorities, consumer protection agencies, financial regulatory agencies and insurance agencies. We are subject to compliance audits of our operations by many of these authorities.
Regulatory bodies include the Consumer Financial Protection Bureau (“CFPB”), the Federal Trade Commission (“FTC”), the Department of Justice (“DOJ”), the Department of Housing and Urban Development (“HUD”), and 11 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC. various state licensing authorities, consumer protection agencies, financial regulatory agencies and insurance agencies.
We have invested in building custom inspection and operator tooling to systematically source and translate home features into a robust data library. These proprietary data points have led us to make approximately 1.9 billion annotations and adjustments to MLS and tax assessor data, as well as build out unique geospatial data assets, such as power line and busy road proximity.
These proprietary data points have led us to make approximately 2.1 billion annotations and adjustments to MLS and tax assessor data, as well as build out unique geospatial data assets, such as power line and busy road proximity.
One example is our virtual home assessment capability for our lowest risk homes, where home sellers are able to take our operators on a virtual, guided tour of their home. Our centralized teams then assess home conditions, leveraging a combination of industry best practices and big data.
One example is our virtual home assessment capability for our lowest risk homes, where home sellers are able to take our operators on a virtual, guided tour of their home, both interior and exterior. Our centralized teams then assess home condition and home features, and compare the subject home to nearby recently sold homes.
One in four home sellers reduces their asking price at least once, while a similar percentage of sellers offer incentives to attract buyers. Once an offer is received, the seller has to negotiate the offer, negotiate the closing date, and deal with any contingencies the buyer may have. • Negotiate repairs or fix issues identified by buyers.
Once an offer is received, the seller has to negotiate the offer, negotiate the closing date, and deal with any contingencies the buyer may have. • Negotiate repairs or fix issues identified by buyers.
Launched in 2022, our 3P product offering connects the home seller with either an institutional or retail buyer, facilitating the transaction without us taking ownership of the home. For home buyers, we are building an e-commerce-like experience that focuses on unique selection and a simple process.
Launched in 2022, our capital-light marketplace offering connects home sellers with both institutional and retail buyers, facilitating transactions without Opendoor taking ownership of the home. For home buyers, we are building an e-commerce-like experience that focuses on unique selection and a streamlined process, including, in some cases, self-touring and click to purchase pricing.
By leveraging software, data science, product design and operations, we are building a managed marketplace for residential real estate that offers buyers and sellers an enhanced experience as compared to traditional real estate transactions. Residential real estate is the largest undisrupted category in the United States.
By leveraging software, data science, product design and operations, we are building a technology platform for residential real estate that offers buyers and sellers a digital, on-demand experience that we believe will be the future of how people buy or sell a home. Residential real estate is the largest undisrupted category in the United States.
Our largely centralized and scalable framework for new market entry enabled us to rapidly grow the number of markets we served in 2021 and 2022. Furthermore, decision making for each home is informed by centralized, robust, data-driven playbooks that allow us to drive consistency across our markets and reach profitability in new markets more quickly. Expand product and service offerings.
Furthermo re, decision making for each home is informed by centralized, robust, data-driven playbooks that allow us to drive consistency across our markets and reach profitability in new markets more quickly. Expand product offerings. Our north star is to build the best end-to-end digital experience for every home seller and buyer.
We will continue to expand our customer base through partnerships and marketing campaigns that increase awareness and engage customers early in their home selling and buying research. Expand to new markets. At 53 markets as of December 31, 2022, we are making good progress towards our long-term goal of being able to deliver for customers nationwide.
As our newer markets mature, we believe we have significant runway for growth. We will continue to expand our customer base through partnerships and marketing campaigns that increase awareness and engage customers early in their home selling and buying research. Expand to new markets.
We have a high quality bar and pay attention to the pixels, words, and results. • Celebrate moments. We work tirelessly for our customers and teammates so we take the time to celebrate moments large and small. Employees As of December 31, 2022, we employed 2,570 individuals, including 2,444 in the United States.
We focus on outputs and outcomes and hold ourselves accountable to hitting ambitious goals. We have a high quality bar and pay attention to the pixels, words, and results. • Celebrate moments. We work tirelessly for our customers and teammates so we take the time to celebrate moments large and small.
Due to our scale, we have procured volume discounts on the cost of materials used in our home repairs. In addition, we have designed our home inventory management processes and home access technology to ensure our homes are regularly cleaned, well-maintained and safe to enable our on-demand, self-tour experience.
In addition, we have designed our home inventory management processes and home access technology to ensure our homes are regularly cleaned, well-maintained and safe to enable our on-demand, self-tour experience. We receive regular home condition status updates from our trade partners and local service provider network who are in our homes multiple times per month.
We select new markets by looking at drivers of supply, demand and affordability, housing stock, cost structure and expected pricing competitiveness. We have honed our market launch playbook by centralizing many of our core pricing, operations and customer service functions, enabling us to efficiently launch new markets with limited in-market physical presence.
We have honed our market launch playbook by centralizing many of our core pricing, operations and customer service functions, enabling us to efficiently launch new markets with limited in-market physical presence. Our largely centralized and scalable framework for new market entry enabled us to rapidly grow the number of markets we served in 2021 and the first half of 2022.
By leveraging our technology platform and directly interfacing with our trade partners, we reduce delays, eliminate waste, and improve quality of repairs while capturing data at every step to continuously improve the system. This increase in third-party capacity also gives us the flexibility to adapt to macro conditions and adjust our operating expenses commensurate with volume expectations.
We have also established a network of approximately 600 trade partners and local service providers that use our proprietary technology to complete home repairs and maintenance. By leveraging our technology platform and directly interfacing with our trade partners, we reduce delays, eliminate waste, and improve quality of repairs while capturing data at every step to continuously improve the system.
For eligible homes, customers receive a preliminary offer, which can be refreshed at any time through their personalized seller dashboard. All of our preliminary offers are algorithmically generated and require minimal human intervention.
Home sellers can visit our website or mobile app and answer a few questions about their home’s condition, features, and upgrades. For eligible homes, customers receive a preliminary offer, which can be refreshed at any time through their personalized seller dashboard.
Our proprietary models are informed by hundreds of data points that have been collected and synthesized in a structured way. 7 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC. • Proprietary offline data. We have conducted approximately 580,000 assessments during which we collect over 150 data points on average for each home and its surroundings.
Our proprietary models are informed by hundreds of data points that have been collected and synthesized in a structured way. • Proprietary offline data.
Offers We generate demand for our products and services through organic awareness and word-of-mouth, paid media spend, and partnership channels such as our relationships with homebuilders and online real estate portals. Home sellers can visit our website or mobile app and answer a few questions about their home’s condition, features and upgrades.
We plan to continue to invest in our business and appropriately balance trade-offs between growth, margin, and risk as we scale. Offers We generate demand for our products and services through organic awareness and word-of-mouth, paid media spend, and partnership channels such as our relationships with homebuilders, real estate agents, and online real estate portals.
Strategic Growth Priorities Our growth strategy is to innovate and execute on the following key strategic priorities: Increase penetration in existing markets. We are focused on continued growth in our existing markets — greater scale improves awareness, trust and adoption, operational cost efficiencies, and pricing competitiveness from more data.
We are focused on continued growth in our existing markets — greater scale improves awareness, trust and adoption, operational cost efficiencies, and pricing competitiveness from more data. We have historically demonstrated our ability to capture over 4% market share in multiple markets, with our oldest market cohorts 9 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC. showing deeper market penetration.
We are working towards a future where both 1P and 3P sales take place on our platform, enabling sellers and buyers to experience a simple and certain transaction that dramatically improves the traditional process. • 1P Product.
All of our products leverage our centralized operations and platform capabilities, enabling sellers and buyers to experience a simple and certain transaction that dramatically improves the traditional process. Today, our product offerings include: • Sell to Opendoor.
We are also giving home sellers control and flexibility, with no upfront commitment. We have launched our 3P offering in a limited number of markets. We have decided to keep our 3P product focused on a small set of markets in 2023 so we can iterate on the product experience quickly.
We are giving home sellers control and flexibility, including over showings and selling timelines. We have launched our marketplace offering in one market, Dallas Fort-Worth, so we can iterate on the product experience quickly.
This is consistent with our approach to how we scaled our 1P product across markets over time. When we are ready to scale the 3P product, we believe we are well positioned to expand it across our existing 1P markets given our ability to leverage our existing 1P infrastructure.
When we are ready to scale, we believe we are well positioned to expand the product across our existing markets given our ability to leverage our existing core product infrastructure. In addition to these products, we also offer customers integrated title insurance and escrow services through our subsidiaries.
Our north star is to build the best end-to-end managed marketplace for every home buyer and seller. We are focused on leveraging both our 1P and 3P product offerings to refine our best-in-class seller experience, expand the options available to sellers in our marketplace, invest in enhancing the buyer experience and continue to integrate the seller and buyer journey.
We are focused on continuing to refine our best-in-class seller experience, drive additional scale and efficiencies, expand the options available to sellers to best suit their specific needs, invest in enhancing the buyer experience, and continue to integrate the seller and buyer journey. Over time, we plan to launch additional products related to real estate transactions and ancillary services.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeA significant portion of our expenses are fixed and do not vary proportionately with fluctuations in revenues. We need to maintain and continue to increase our transaction volumes to benefit from operating efficiencies. When we operate at less than expected capacity, fixed costs are inflated and represent a larger percentage of overall cost basis and percentage of revenue.
Biggest changeA significant portion of our costs and expenses are fixed, and we may not be able to adapt our cost structure to offset declines in our revenue. A significant portion of our expenses are fixed and do not vary proportionately with fluctuations in revenues. We need to maintain and continue to increase our transaction volumes to benefit from operating efficiencies.
Our existing and potential competitors include companies that operate, or could develop, national and/or local real estate businesses offering services to home buyers or sellers, including real estate brokerage services, title insurance, and escrow services. Some of our competitors have well-established national reputations and may market similar products and services.
Our existing and potential competitors include companies that operate, or could develop, national and/or local real estate businesses offering services to home buyers or sellers, including real estate brokerage services, title insurance, and escrow services. Some of our competitors may have well-established national reputations and may market similar products and services.
We early adopted the provisions of ASU 2020-06 effective January 1, 2021. In accordance with ASU 2020-06, the 2026 notes are reflected as a liability on our consolidated balance sheets, with the initial carrying amount equal to the principal amount of the notes, net of issuance costs.
We early adopted the provisions of ASU 2020-06 effective January 1, 2021. In accordance with ASU 2020-06, the 2026 Notes are reflected as a liability on our consolidated balance sheets, with the initial carrying amount equal to the principal amount of the 2026 Notes, net of issuance costs.
Under that method, if the conversion value of the notes exceeds their principal amount for a reporting period, then we will calculate our diluted earnings per share assuming that all of the notes were converted at the beginning of the reporting period and that we issued shares of our common stock to settle the excess.
Under that method, if the conversion value of the 2026 Notes exceeds their principal amount for a reporting period, then we will calculate our diluted earnings per share assuming that all of the 2026 Notes were converted at the beginning of the reporting period and that we issued shares of our common stock to settle the excess.
However, if reflecting the notes in diluted earnings per share in this manner is anti-dilutive, or if the conversion value of the notes does not exceed their principal amount for a reporting period, then the shares underlying the notes will not be reflected in our diluted earnings per share.
However, if reflecting the 2026 Notes in diluted earnings per share in this manner is anti-dilutive, or if the conversion value of the 2026 Notes does not exceed their principal amount for a reporting period, then the shares underlying the 2026 Notes will not be reflected in our diluted earnings per share.
We operate in a competitive and fragmented industry, which could impair our ability to attract users of our products, which could harm our business, results of operations and financial condition. We operate in a competitive and fragmented industry, and we expect competition to continue to increase.
We operate in a competitive and fragmented industry that could impair our ability to attract users of our products, which could harm our business, results of operations and financial condition. We operate in a competitive and fragmented industry, and we expect competition to continue to increase.
We cannot assure you that we, or our licensed personnel, are and will remain at all times, in full compliance with local, state and federal real estate, title insurance and escrow, property and casualty insurance, construction, and mortgage licensing and consumer protection laws and regulations, and we may be subject to litigation, government investigations and enforcement actions, fines or other penalties in the event of any non-compliance.
We cannot assure you that we, or our licensed personnel, are and will remain at all times, in full compliance with local, state and federal real estate, title insurance and escrow, property and casualty insurance, real estate licensing and consumer protection laws and regulations, and we may be subject to litigation, government investigations and enforcement actions, fines or other penalties in the event of any non-compliance.
The issuance costs were treated as a debt discount for accounting purposes, which will be amortized into interest expense over the term of the notes.
The issuance costs were treated as a debt discount for accounting purposes, which will be amortized into interest expense over the term of the 2026 Notes.
Our information systems and technology may not be able to continue to accommodate our growth and may be subject to security risks. The cost of maintaining such systems may increase.
Our information systems and technology may not be able to continue to accommodate our growth and are subject to security risks. The cost of maintaining such systems may increase.
This assessment includes estimates on time of possession, seasonality, macroeconomic and hyper-local market conditions, renovation costs and holding costs, transaction costs, and anticipated resale proceeds.
This assessment includes estimates on time of possession, seasonality, macroeconomic and local market conditions, renovation costs and holding costs, transaction costs, and anticipated resale proceeds.
In addition, we may encounter difficulties in building and marketing this new offering, such as obtaining the necessary licensing and staffing, building a marketing apparatus for the offering, or standing up other business operations, These difficulties could make expanding to new markets too slow to cover the fixed and upfront costs of setting up the marketplace.
In addition, we may encounter difficulties in building and marketing new offerings, such as obtaining the necessary licensing and staffing, building a marketing apparatus for the offering, or standing up other business operations. These difficulties could make expanding to new markets too slow to cover the fixed and upfront costs of setting up the marketplace.
The CCPA requires (and the CPRA will require) covered companies to, among other things, provide new disclosures to California consumers, and affords such consumers new privacy rights such as the ability to opt-out of certain sales of personal information and expanded rights to access and require deletion of their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is collected, used and shared.
The CCPA and CPRA require covered companies to, among other things, provide new disclosures to California consumers, and affords such consumers new privacy rights such as the ability to opt-out of certain sales of personal information and expanded rights to access and require deletion of their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is collected, used and shared.
For example, the Inflation Reduction Act of 2022, enacted on August 16, 2022, imposes a one-percent non-deductible excise tax on repurchases of stock that are made by U.S. publicly traded corporations on or after January 1, 2023, which may affect any future share repurchases.
For example, the Inflation Reduction Act of 2022, enacted on August 16, 2022, imposed a one-percent non-deductible excise tax on repurchases of stock that are made by U.S. publicly traded corporations on or after January 1, 2023, which may affect any future share repurchases.
Additionally, we may incur significant losses in the future for a number of reasons, including the following: • our failure to appropriately price and manage the home inventory we acquire; • changes in our fee structure or rates; • the availability of debt financing and securitization funding to finance our real estate inventories; • our inability to grow market share in our existing markets or any new markets we may enter; • our expansion into new markets, for which we typically incur more significant losses immediately following entry; • increased competition in the U.S. residential real estate industry; 13 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC. • our failure to realize anticipated efficiencies through our technology and business model; • costs associated with enhancements of our products and introducing new product offerings; • our failure to execute our growth strategies; • declines in U.S. residential real estate transaction volumes; • increased marketing costs; • lack of access to housing market data that is used in our pricing models at reasonable cost, if at all; • hiring additional personnel to support our overall growth; • loss in value of real estate 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; 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 the following: • our failure to appropriately price and manage the home inventory we acquire; • changes in our fee structure or rates; • the availability of debt financing and securitization funding to finance our real estate inventories; • our inability to grow market share in our existing markets or any new markets we may enter; • our expansion into new markets, for which we typically incur more significant losses immediately following entry; • increased competition in the U.S. residential real estate industry; • our failure to realize anticipated efficiencies through our technology and business model; • costs associated with enhancements of our products and introducing new product offerings; • our failure to execute our growth strategies; • declines in U.S. residential real estate transaction volumes; • increased marketing costs; • lack of access to housing market data that is used in our pricing models at reasonable cost, if at all; • hiring additional personnel to support our overall growth; • loss in value of real estate 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; and • unforeseen expenses, difficulties, complications and delays, and other unknown factors.
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. Environmentally hazardous conditions may adversely affect us.
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 material impact on our results of operations. Environmentally hazardous conditions may adversely affect us.
In addition, the shares underlying the notes will be reflected in our diluted earnings per share using the “if-converted” method.
In addition, the shares underlying the 2026 Notes will be reflected in our diluted earnings per share using the “if-converted” method.
In addition, the availability of committed financing is typically subject to us meeting certain conditions, which may include financial or collateral performance tests or metrics. As of December 31, 2022, we satisfied the financial and collateral performance-based conditions to borrowing under our debt facilities.
In addition, the availability of committed financing is typically subject to us meeting certain conditions, which may include financial or collateral performance tests or metrics. As of December 31, 2023, we satisfied the financial and collateral performance-based conditions to borrowing under our debt facilities.
We generally seek to comply with industry standards and are subject to the terms of our own privacy policies and privacy-related obligations to third parties. We strive to comply with all applicable laws, policies, legal obligations and industry codes of conduct relating to privacy and data protection to the extent possible.
We generally seek to align our practice with industry standards and are subject to the terms of our own privacy policies and privacy-related obligations to third parties. We strive to comply with all applicable laws, policies, legal obligations and industry codes of conduct relating to privacy and data protection to the extent possible.
Any significant change to applicable laws, regulations or industry practices regarding the use or disclosure of personal information, or regarding the manner in which the express or implied consent of customers for the use and disclosure of personal information is obtained, could require us to modify our products and features, possibly in a material manner and subject to increased compliance costs, which may limit our ability to develop new products and features that make use of the personal information that our customers voluntarily share.
Any significant change to applicable laws, regulations or industry practices regarding the use or disclosure of personal information, or regarding the manner in which the express or implied consent of customers for the use and disclosure of personal information is obtained (including for advertising purposes), could require us to modify our products and features, possibly in a material manner and subject to increased compliance costs, which may limit our ability to develop new products and features that make use of the personal information that our customers voluntarily share.
In addition, as of January 1, 2022, the Tax Act requires research and experimental expenditures attributable to research conducted within the United States to be capitalized and amortized ratably over a five-year period. Any such expenditures attributable to research conducted outside the United States must be capitalized and amortized over a 15-year period.
In addition, as of January 1, 2022, the Tax Act required research and experimental expenditures attributable to research conducted within the United States to be capitalized and amortized ratably over a five-year period. Any such expenditures attributable to research conducted outside the United States must be capitalized and amortized over a 15-year period.
Any inefficiencies, errors, technical problems or vulnerabilities arising in our technology 23 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC. offerings after their release could reduce the quality of our products or interfere with our customers’ access to and use of our technology and offerings.
Any inefficiencies, errors, technical problems or vulnerabilities arising in our technology offerings after their release could reduce the quality of our products or interfere with our customers’ access to and use of our technology and offerings. 24 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC.
The accounting method for reflecting the convertible notes on our balance sheet, accruing interest expense for the convertible notes and reflecting the underlying shares of our common stock in our reported diluted earnings per share may adversely affect our reported earnings and financial condition.
The accounting method for reflecting the 2026 Notes on our balance sheet, accruing interest expense for the 2026 Notes and reflecting the underlying shares of our common stock in our reported diluted earnings per share may adversely affect our reported earnings and financial condition.
In order to provide the broad range of products and services that we offer customers, certain of our subsidiaries maintain title insurance and escrow, property and casualty insurance, construction, and licenses in certain states in which we operate.
In order to provide the broad range of products and services that we offer customers, certain of our subsidiaries maintain title insurance and escrow, property and casualty insurance, construction, and real estate licenses in certain states in which we operate.
We are currently, and may in the future be, the target of this type of litigation. For example, securities litigation claims were filed against us and certain of our current and former officers and directors in October 2022 and November 2022 related to our pricing algorithm. Litigation is inherently uncertain and adverse rulings could occur, including monetary damages.
We are currently, and may in the future be, the target of this type of litigation. For example, securities litigation claims related to our pricing algorithm were filed against us and certain of our current and former officers and directors in 2022 and 2023. Litigation is inherently uncertain and adverse rulings could occur, including monetary damages.
We had an accumulated deficit of $3.1 billion and $1.7 billion as of December 31, 2022 and 2021, respectively. We expect to continue to make future investments in developing and expanding our business, including technology, recruitment and training, marketing and pursuing strategic opportunities. These investments may not result in increased revenue or growth in our business.
We had an accumulated deficit of $3.3 billion and $3.1 billion as of December 31, 2023 and 2022, respectively. We expect to continue to make future investments in developing and expanding our business, including technology, recruitment and training, marketing and pursuing strategic opportunities. These investments may not result in increased revenue or growth in our business.
We may not be able to reverse such contraction and grow our business in the future if we do not, among other things: • continue to increase the number of customers using our platform; • avoid future inventory valuation adjustments; • acquire sufficient inventory based on our underwriting standards to meet demand for our homes; • 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; • obtain necessary capital to meet our business objectives; • expand our third-party vendor networks; and • scale our internal operations and customer support teams.
We may not be able to reverse such contraction and grow our business in the future if we do not, among other things: • continue to increase the number of customers using our platform; • avoid future inventory valuation adjustments; • acquire sufficient inventory based on our underwriting standards to meet demand for our homes; • increase our market share within existing markets and expand into new markets; • manage operating expenses; • increase our brand awareness; 15 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC. • retain adequate availability of financing sources; • obtain necessary capital to meet our business objectives; • expand our third-party vendor networks; and • scale our internal operations and customer support teams.
Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 7. Credit Facilities and Long-Term Debt ” for additional information regarding our debt and financing arrangements.
Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 5. Credit Facilities and Long-Term Debt ” for additional information regarding our debt and financing arrangements.
As we expand our marketplace to new markets, we may find that local preferences, conditions, or regulations differ from our other markets such that the benefits of scale do not materialize. In addition, developing and marketing our 3P product could have higher costs than anticipated and could adversely impact our results or dilute our brand.
As we expand to new markets, we may find that local preferences, conditions, or regulations differ from our other markets such that the benefits of scale do not materialize. In addition, developing and marketing our listing and marketplace products could have higher costs than anticipated and could adversely impact our results or dilute our brand.
Such events may negatively impact our stock price and ability to raise capital regardless of whether those events have any actual relationship with our business and financial or operational performance. While we have experienced rapid growth historically, our business experienced significant contraction in the second half of 2022.
Such events may negatively impact our stock price and ability to raise capital regardless of whether those events have any actual relationship with our business and financial or operational performance. While we have experienced rapid growth historically, our business experienced significant contraction in the second half of 2022, which continued throughout 2023.
In connection with the pricing of the 2026 Notes, we entered into privately negotiated Capped Calls with certain financial institutions (the “option counterparties”).
In connection with the pricing of the 2026 Notes, we entered into privately negotiated capped calls (the “Capped Calls”) with certain financial institutions (the “option counterparties”).
We have a history of losses, and we may not achieve or maintain profitability in the future. We have incurred net losses on an annual basis since we were founded. We incurred net losses of $1.4 billion, $662 million, and $253 million for the years ended December 31, 2022, 2021, and 2020, respectively.
We have a history of losses, and we may not achieve or maintain profitability in the future. We have incurred net losses on an annual basis since we were founded. We incurred net losses of $275 million, $1.4 billion, and $662 million for the years ended December 31, 2023, 2022, and 2021, respectively.
The CCPA, CPRA, CDPA and CPA may increase our compliance costs and potential liability, particularly in the event of a data breach, and could have a material adverse effect on our business, including how we use personal information, our financial condition, the results of our operations or prospects.
The CCPA, CPRA, VCDPA, CPA, CTDPA and UCPA may increase our compliance costs and potential liability, particularly in the event of a data breach, and could have a material adverse effect on our business, including how we use personal information, our financial condition, the results of our operations or prospects.
In addition, the option counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions from time to time prior to the maturity of the 2026 Notes (and are likely to do so during any observation period related to a conversion of 2026 Notes or any redemption or repurchase of the 2026 Notes).
In addition, the option counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions from time to time prior to the maturity of the 2026 Notes (and are likely to 30 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC. do so during any observation period related to a conversion of 2026 Notes or any redemption or repurchase of the 2026 Notes).
The price of our common stock may fluctuate due to a variety of factors, including: • changes in the industries in which we and our customers operate; • developments involving our competitors; • changes in laws and regulations affecting our business; • variations in our operating performance and the performance of our competitors in general; • actual or anticipated fluctuations in our quarterly or annual operating results; • publication of research reports by securities analysts about us or our competitors or our industry; • changes in financial estimates and recommendations by securities analysts; • short sellers manipulating our stock, resulting in a price decrease; • our business being subject to seasonality with greater demand and home price appreciation from home buyers in the spring and summer, and typically weaker demand and lower home price appreciation in late fall and winter; • the public’s reaction to our press releases, our other public announcements and our filings with the SEC; • actions by stockholders, including the sale of their shares of our common stock; • additions and departures of key personnel; • commencement of, or involvement in, litigation involving our Company; • changes in our capital structure, such as future issuances of securities or the incurrence of additional debt; • the volume of shares of our common stock available for public sale; and • general economic and political conditions, such interest rate increases, including the recent significant increases in 2022, higher inflation and decreased consumer confidence, recessions, the ongoing effects of the pandemic related to COVID-19 and its variants, local and national elections, fuel prices, international currency fluctuations, corruption, inflation, political instability, and acts of war or terrorism.
The price of our common stock may fluctuate due to a variety of factors, including: • changes in the industries in which we and our customers operate; • developments involving our competitors; • changes in laws and regulations affecting our business; • variations in our operating performance and the performance of our competitors in general; • actual or anticipated fluctuations in our quarterly or annual operating results; • publication of research reports by securities analysts about us or our competitors or our industry; • changes in financial estimates and recommendations by securities analysts; • short sellers manipulating our stock, resulting in a price decrease; • our business being subject to seasonality with greater demand and home price appreciation from home buyers in the spring and summer, and typically weaker demand and lower home price appreciation in late fall and winter; • the public’s reaction to our press releases, our other public announcements and our filings with the SEC; 33 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC. • actions by stockholders, including the sale of their shares of our common stock; • additions and departures of key personnel; • commencement of, or involvement in, litigation involving our Company; • changes in our capital structure, such as future issuances of securities or the incurrence of additional debt; • the volume of shares of our common stock available for public sale; and • general economic and political conditions, such interest rate increases, including the recent significant increases in 2022 and 2023, higher inflation and decreased consumer confidence, recessions, the future impacts of pandemics or epidemics, including any future resurgences of COVID-19 and its variants, local and national elections, fuel prices, international currency fluctuations, corruption, inflation, political instability, and acts of war or terrorism.
Failures by our perceived competitors or companies with an iBusiness model in other markets may adversely impact Opendoor.
Failures by our perceived competitors or companies with an iBuying model in other markets may adversely impact Opendoor.
We utilize a significant amount of debt and financing arrangements 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. As of December 31, 2022 we had approximately $4.4 billion of non-recourse asset-backed loans.
We utilize a significant amount of debt and financing arrangements in the operation of our business. 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. As of December 31, 2023 we had approximately $2.2 billion of non-recourse asset-backed loans.
Such a recessionary environment may also result in reduced sources of financing and liquidity, among other adverse impacts for our business, results of operations, and financial condition.
Such a recessionary environment or economic uncertainty may also result in reduced sources of financing and liquidity, among other adverse impacts for our business, results of operations, and financial condition.
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, and sharing of personal information and provides new and enhanced data privacy rights to California residents. The CCPA, like other comprehensive state privacy laws, imposes a severe statutory damages framework.
While our SPEs’ lenders’ recourse in most situations following an event of default is only to the applicable SPE or its assets, we have provided limited guarantees for certain of the SPEs’ obligations in situations involving 31 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC. “bad acts” by an Opendoor entity and certain other limited circumstances.
While our SPEs’ lenders’ recourse in most situations following an event of default is only to the applicable SPE or its assets, we have provided limited guarantees for certain of the SPEs’ obligations in situations involving “bad acts” by an Opendoor entity and certain other limited circumstances.
Since March 2022, the Federal Reserve Board has raised its benchmark rate multiple times from 0.25% to 4.50% as of December 31, 2022.
Since March 2022, the Federal Reserve Board has raised its benchmark rate multiple times from 0.25% to 5.50% as of December 31, 2023.
In addition, even if holders do not elect to convert their 2026 Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the 2026 Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.
In addition, even if holders do not elect to convert their 2026 Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the 2026 Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital. 29 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC.
As a result of such review, we recorded an inventory valuation adjustment of $737 million in 2022, of which $458 million related to homes remaining in inventory at December 31, 2022. These adjustments, based upon anticipated, but not realized losses, caused an immediate reduction of net income and a corresponding decrease in real estate inventory in the accounting period identified.
As a result of such review, we recorded an inventory valuation adjustment of $65 million in 2023, of which $23 million related to homes remaining in inventory at December 31, 2023. These adjustments, based upon anticipated, but not realized losses, caused an immediate reduction of net income and a corresponding decrease in real estate inventory in the accounting period identified.
As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform, and Consumer Protection Act, as well as rules adopted, and to be adopted, by the SEC and the applicable stock exchange.
As a public company, we are subject to the reporting and other requirements of the Exchange Act, the Sarbanes-Oxley Act, and the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as rules adopted, and to be adopted, by the SEC and Nasdaq.
To the extent people migrate outside of these markets due to lower home prices or other factors, and this migration continues to take place over the long-term, then the relative percentage of residential housing transactions may shift away from our historical top markets where we have generated most of our revenue.
To the extent people migrate outside of these markets due to lower 18 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC. home prices or other factors, and this migration continues to take place over the long-term, then the relative percentage of residential housing transactions may shift away from our historical top markets where we have generated most of our revenue.
While these prior claims have not been material and have all been resolved, there may be additional claims in the future where, if we are not successful in defending ourselves against these claims, we may be required to pay damages and may be subject to injunctions, each of which could harm our business, results of operations, financial condition and reputation. 22 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC.
While these prior claims have not been material and have all been resolved, there may be additional claims in the future where, if we are not successful in defending ourselves against these claims, we may be required to pay damages and may be subject to injunctions, each of which could harm our business, results of operations, financial condition and reputation.
If we are unable to recover our marketing costs through increases in customer traffic and in the number of transactions by users of our platform, or if our broad marketing campaigns are not successful or are terminated, it could have a material adverse effect on our growth, results of operations, and financial condition.
If we are unable to recover our marketing costs through increases in customer traffic and in the number of transactions by users of our platform, or if our broad marketing campaigns are not successful or are terminated, it could have a material adverse effect on our growth, results of operations, and financial condition. 17 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC.
If we fail to maintain adequate relationships with 30 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC. potential financial sources or we elect to prepay or 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 we elect to prepay or 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.
The foregoing considerations significantly increase the likelihood that a default or related enforcement or foreclosure event under one or more of our debt facilities would result in adverse consequences for our other debt facilities. Failure to hedge effectively against interest rate changes may adversely affect our results of operations.
The foregoing considerations significantly increase the likelihood that a default or related enforcement or foreclosure event under one or more of our debt facilities would result in adverse consequences for our other debt facilities. 32 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC. Failure to hedge effectively against interest rate changes may adversely affect our results of operations.
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.
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 27 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC. 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.
If we have excess inventory or our average days to sale increases, as was the case in the second half of 2022 alongside home price value decreases, the results of our operations may be adversely affected because we may be unable to liquidate such inventory at prices that allow us to meet margin targets or to recover our costs.
Furthermore, if we have excess inventory or our average days to sale increases, as was the case in the second half of 2022 alongside home price value decreases, the results of our operations may be adversely affected because we may be unable to liquidate such inventory at prices that allow us to meet margin targets or to recover our costs. 16 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC.
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. 21 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC.
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.
Such claims, suits, government investigations, and proceedings are inherently uncertain, and their results cannot be predicted with certainty. Regardless of the 35 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC. outcome, any such legal proceedings can have an adverse impact on us because of legal costs, diversion of management and other personnel, negative publicity and other factors.
Such claims, suits, government investigations, and proceedings are inherently uncertain, and their results cannot be predicted with certainty. Regardless of the outcome, any such legal proceedings can have an adverse impact on us because of legal costs, diversion of management and other personnel, negative publicity and other factors.
Launches of new product or service offerings, like our 3P product, and expansions of existing product and servicing offerings, may consume significant financial and other resources and may not achieve the desired results. We regularly evaluate launching new product or service offerings to our customers, as well as expanding existing offerings.
Launches of new product or service offerings and expansions of existing products, like our listing and marketplace products, may consume significant financial and other resources and may not achieve the desired results. We regularly evaluate launching new product or service offerings to our customers, as well as expanding existing offerings.
A number of factors have impacted and could in the future negatively impact and harm our business, including the following: • downturns in the U.S. residential real estate market that may be due to one or more factors, whether included in this list or not; • changes in national, regional, or local economic, demographic or real estate market conditions; • increased mortgage interest rates, such as the recent significant increases in interest rates in 2022, or down payment requirements and/or restrictions on mortgage financing availability; • low home inventory levels or lack of affordably priced homes; • labor or materials supply shortages; • slow economic growth or inflationary or recessionary conditions; • increased levels of unemployment or declining wages; • declines in the value of residential real estate and/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 and/or the U.S. residential real estate industry; • the continuing and future impacts of the pandemic caused by COVID-19 and its variants, or a future pandemic, on buying and selling trends in the residential real estate market; • changes 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, 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.
A number of factors have impacted and could in the future negatively impact and harm our business, including the following: • downturns in the U.S. residential real estate market that may be due to one or more factors, whether included in this list or not; • changes in national, regional, or local economic, demographic or real estate market conditions; • increased mortgage interest rates, such as the recent significant increases in interest rates in 2022 and 2023, or down payment requirements and/or restrictions on mortgage financing availability; • low home inventory levels or lack of affordably priced homes; • high rental occupancy rates; • labor or materials supply shortages; • slow economic growth or inflationary or recessionary conditions; • increased levels of unemployment or declining wages; • declines in the value of residential real estate and/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 supply or demand, and increases in costs for homeowners such as property taxes, homeowners’ association fees and availability and/or affordability of insurance; • low levels of consumer confidence in the economy and/or the U.S. residential real estate industry; • the future impacts of pandemics or epidemics, including any future resurgences of COVID-19 and its variants, on buying and selling trends in the residential real estate market; • changes 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, which limited deductions of certain mortgage interest expenses and property taxes; or • natural and man-made disasters and other catastrophic events, such as hurricanes, windstorms, tornadoes, earthquakes, wildfires, floods, hailstorms, terrorist attacks and other events that disrupt local, regional, or national real estate markets. 13 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC.
A reduction in the availability of or access to inventory, including due to macroeconomic 18 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC. conditions, could have a material adverse effect on 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 inventory, including due to macroeconomic conditions, could have a material adverse effect on our business, sales, and results of operations. Additionally, we evaluate thousands of potential homes daily using our proprietary pricing model.
To the extent that our services depend upon the successful operation of open source software, any undetected errors or defects in this open source software could prevent the deployment or impair the functionality of our platform, delay new solutions introductions, result in a failure of our platform, and injure our reputation.
To the extent that our services depend upon the successful operation of open source software, any undetected errors or defects in this open source software could prevent the deployment or impair the functionality of our platform, delay new solutions introductions, result in a failure of our platform, and injure our reputation. 23 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC.
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.
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. 31 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC.
The United States government may enact further significant changes to the taxation of business entities including, among others, an increase in the corporate income tax rate, the imposition of minimum taxes or surtaxes on certain types of income or significant changes to the taxation of income derived from international operations. 27 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC.
The United States government may enact further significant changes to the taxation of business entities including, among others, an increase in the corporate income tax rate, the imposition of minimum taxes or surtaxes on certain types of income or significant changes to the taxation of income derived from international operations.
In the event of a major earthquake, hurricane, windstorm, tornado, flood, or catastrophic event such as pandemic, fire, flood, power loss, telecommunications failure, cyber-attack, war, or terrorist attack, we may be unable to continue our operations and may endure reputational harm, delays in developing our platform and solutions, breaches of data security and loss of critical data, all of which could harm our business, results of operations and financial condition.
In the event of a major earthquake, hurricane, windstorm, tornado, flood, or catastrophic event such as pandemic (including any future resurgences of COVID-19 and its variants), epidemic, fire, flood, power loss, telecommunications failure, cyber-attack, war, or terrorist attack, we may be unable to continue our operations and may endure reputational harm, delays in developing our platform and solutions, breaches of data security and loss of critical data, all of which could harm our business, results of operations and financial condition.
In addition, the value of homes in inventory may decline significantly and we could experience losses, which in the aggregate could be detrimental to our business and results of operations.
In addition, the value of homes in inventory may decline, and we could experience losses as a result, which in the aggregate could be detrimental to our business and results of operations.
As a result, fluctuations in our ultimate tax obligations may differ materially from amounts recorded in our financial statements and could adversely affect our business, financial condition and results of operations in the periods for which such determination is made.
As a result, fluctuations in our ultimate tax obligations may differ materially from amounts recorded in our financial statements and could adversely affect our business, financial condition and results of operations in the periods for which such determination is made. 28 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC.
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.
See “Forward-Looking Statements.” 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.
During past economic and housing downturns and more recently at the onset of the COVID-19 pandemic, credit markets constricted and reduced sources of liquidity. In addition, recent significant increases in interest rates, supply chain issues, and higher inflation have increased concerns that the economy may enter into a recession.
During past economic and housing downturns and at the onset of the COVID-19 pandemic, credit markets constricted and reduced sources of liquidity. In addition, throughout 2022 and 2023 significant increases in interest rates, supply chain issues, and higher inflation increased concerns that the economy may enter into a recession.
We may encounter unanticipated problems as we continue to refine our business model and may be forced to make significant changes to our anticipated sales and revenue models to compete with our competitors’ offerings, which may adversely affect our results of operations and profitability.
We may encounter unanticipated problems as we continue to refine our business model and may be forced to make significant changes to our anticipated sales and revenue models to compete with our competitors’ offerings, which may adversely affect our results of operations and profitability. 14 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC.
Further, due to the geographic scope of our operations and 24 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC. the nature of the products and services we provide, certain of our other subsidiaries maintain real estate brokerage, property and casualty, and title insurance and escrow, and construction licenses in certain states in which we operate.
Further, due to the geographic scope of our operations and the nature of the products and services we provide, certain of our other subsidiaries maintain real estate brokerage, property and casualty, and title insurance and escrow, and construction licenses in certain states in which we operate.
If the holders of the 2026 Notes become entitled to convert the 2026 Notes pursuant to the related indenture and one or more holders elect to convert their 2026 Notes, we would be required to elect to settle either all or a portion of our conversion obligation in cash, which could adversely affect our liquidity.
If the holders of our 0.25% convertible senior notes due in 2026 (the “2026 Notes”) become entitled to convert the 2026 Notes pursuant to the related indenture and one or more holders elect to convert their 2026 Notes, we would be required to elect to settle either all or a portion of our conversion obligation in cash, which could adversely affect our liquidity.
The variables that go into the calculation of our market opportunity are subject to change over time, and there is no guarantee that our market opportunity estimates will reflect actual revenue that we will generate from our 20 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC. platform in the future.
The variables that go into the calculation of our market opportunity are subject to change over time, and there is no guarantee that our market opportunity estimates will reflect actual revenue that we will generate from our platform in the future.
In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many technology companies. Companies that have experienced volatility in the market price of their stock have 25 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC. been subject to securities class action litigation.
In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many technology companies. Companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation.
The application of 29 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC. the if-converted method may reduce our reported diluted earnings per share, and accounting standards may change in the future in a manner that may adversely affect our diluted earnings per share. The Capped Calls may affect the value of the 2026 Notes and our common stock.
The application of the if-converted method may reduce our reported diluted earnings per share, and accounting standards may change in the future in a manner that may adversely affect our diluted earnings per share. The Capped Calls may affect the value of the 2026 Notes and our common stock.
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.
Cybersecurity 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.
In addition, our measure of certain metrics may differ from estimates published by third parties or from similarly-titled metrics of our competitors due to differences in methodology and as a result our results may not be comparable to our competitors.
In addition, our measure of certain metrics may differ from estimates published by third parties or from similarly-titled metrics of our competitors due to differences in methodology and as a result our results may not be comparable to our competitors. 26 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC.
Our ability to acquire and resell homes profitably may be negatively impacted if our models lack robust historical data on home sales, material home features, or other market nuances, especially those outside of features and nuances we have previously encountered and modeled in our existing 15 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC. 53 markets.
Our ability to acquire and resell homes profitably may be negatively impacted if our models lack robust historical data on home sales, material home features, or other market nuances, especially those outside of features and nuances we have previously encountered and modeled in our existing 50 markets.
Failures at financial institutions at which we deposit funds could adversely affect us. We deposit substantial funds in various financial institutions in excess of insured deposit limits. In the event that one or more of these financial institutions fail, there is no guarantee that we could recover the deposited funds in excess of federal deposit insurance.
We deposit substantial funds in various financial institutions in excess of insured deposit limits. In the event that one or more of these financial institutions fail, there is no guarantee that we could recover the deposited funds in excess of federal deposit insurance.
These risks include, without limitation: possible declines in the value of real estate; risks related to general and local economic conditions; demographic and population shifts and migration; possible lack of availability of mortgage funds; overbuilding; extended vacancies of properties; increases in competition, property taxes and operating expenses; changes in zoning laws; increased labor costs; unemployment; costs resulting from the clean-up of, and liability to third parties for damages resulting from, environmental problems; casualty or condemnation losses; and uninsured damages from floods, hurricanes, earthquakes or other natural disasters.
These risks include, without limitation: possible declines in the value of real estate; risks related to general and local economic conditions; demographic and population shifts and migration; possible lack of availability of mortgage funds; overbuilding; extended vacancies of properties; increases in competition, property taxes and operating expenses; changes in zoning laws; increased labor costs; unemployment; costs resulting from the clean-up of, and liability to third parties for damages resulting from, environmental problems; casualty or condemnation losses; changes in meteorological or climatic conditions; and uninsured damages from floods, hurricanes, wildfires, earthquakes or other natural disasters, which may become more frequent or severe as a result of climate change.
Additionally, we are subject to the California Privacy Rights Act, or the CPRA, which expands upon the CCPA.
Additionally, we are subject to the California Privacy Rights Act (the “CPRA”), which expands upon the CCPA.
Our business reputation with consumers and third parties also could be damaged. Compliance with, and monitoring of, these laws and regulations is complicated and costly and may inhibit our ability to innovate or grow.
Our business reputation with consumers and third parties also could be damaged. Compliance with, and monitoring of, these laws and regulations is complicated and costly and may inhibit our ability to innovate or grow. 25 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC.
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, or the TCPA, (as implemented by the Telemarketing Sales Rule), the CAN-SPAM Act, and similar state consumer protection laws.
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 TCPA (as implemented by the Telemarketing Sales Rule), the CAN-SPAM Act, and 21 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC. similar state consumer protection laws.
The cost of defending against environmental claims, of compliance with environmental regulatory requirements or of remediating any contaminated property could materially and adversely affect us. Compliance with new or more stringent environmental laws or regulations or stricter interpretation of existing laws may require material expenditures by us.
The cost of defending against environmental claims, of 20 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC. compliance with environmental regulatory requirements or of remediating any contaminated property could materially and adversely affect us. Compliance with new or more stringent environmental and climate-related laws or regulations or stricter interpretation of existing laws may require material expenditures by us.
We have incurred losses during our history and do not expect to become profitable in the near future, and may never achieve profitability. 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.
We have incurred losses during our history, and we may not achieve or maintain profitability in the future. 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.
A property owner who violates environmental laws may be subject to sanctions which may be enforced by governmental agencies or, in certain circumstances, private parties. In connection with the acquisition and ownership of our properties, we may be exposed to such costs.
A property owner who violates environmental laws may be subject to sanctions which may be enforced by governmental agencies or, in certain circumstances, private parties. In connection with the acquisition and ownership of our properties, as well as any repairs to or arrangement for the transport of materials from such properties, we may be exposed to such costs.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeLocation Purpose Approximate Square Feet Principal Lease Expiration Dates Tempe, Arizona General Office Space, Corporate Mailing Address 100,807 2030 Duluth, Georgia General Office Space 71,085 2029 In addition, we lease office space in several other locations in the United States and India.
Biggest changeLocation Purpose Approximate Square Feet Principal Lease Expiration Dates Tempe, Arizona General Office Space, Corporate Mailing Address 53,867 2030 Duluth, Georgia General Office Space 71,085 2029 In addition, we lease office space in several other locations in the United States and India. 38 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC.
Item 2. Properties. We have various operating leases for office space, which are summarized as of December 31, 2022 in the table below. We believe that our facilities are adequate for our current needs.
Item 2. Properties. We have various operating leases for office space, which are summarized as of December 31, 2023 in the table below. We believe that our facilities are adequate for our current needs.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

5 edited+13 added−4 removed3 unchanged
Biggest changeThe complaints name as defendants the Company, certain of the Company’s current and former officers and directors, the underwriters of two securities offerings the Company made in 2021, and a selling shareholder, SVF Excalibur (Cayman) Limited.
Biggest changeII (“SCH”), certain of the Company’s current and former officers and directors and the underwriters of a securities offering the Company made in February 2021.
The complaints assert claims on behalf of all persons and entities that purchased, or otherwise acquired, Company common stock between December 21, 2020 and September 16, 2022 or pursuant to offering documents issued in connection with our business combination with SCH and the secondary public offerings conducted by the Company in February 2021 and September 2021.
The complaint asserts claims on behalf of all persons and entities that purchased, or otherwise acquired, Company common stock between December 21, 2020 and November 3, 2022 or pursuant to offering documents issued in connection with our business combination with SCH and the secondary public offering conducted by the Company in February 2021.
The complaints allege that the Company and certain officers violated Section 10(b) of the Exchange Act and SEC Rule 10b-5, and that the Company, certain officers and directors, the underwriters, and SVF violated Section 11 and/or Section 12(a)(2) of the Securities Act, in each case by making materially false or misleading statements related to the effectiveness of the Company’s pricing algorithm.
The complaint alleges that the Company and certain officers violated Section 10(b) of the Exchange Act and SEC Rule 10b-5, and that the Company, SCH, certain officers and directors and the underwriters violated Section 11 of the Securities Act, in each case by making materially false or misleading statements related to the effectiveness of the Company’s pricing algorithm.
On October 7, 2022 and November 22, 2022, purported securities class action lawsuits were filed in the United States District Court for the District of Arizona, captioned Alich v. Opendoor Technologies Inc., et al. (Case No. 2:22-cv-01717-JFM) (“Alich”) and Oakland County Voluntary Employees’ Beneficiary Association, et al. v. Opendoor Technologies Inc., et al. (Case No. 2:22-cv-01987-GMS) (“Oakland County”), respectively.
Item 3. Legal Proceedings. On October 7, 2022 and November 22, 2022, purported securities class action lawsuits were filed in the United States District Court for the District of Arizona, captioned Alich v. Opendoor Technologies Inc., et al. (Case No. 2:22-cv-01717-JFM) (“Alich”) and Oakland County Voluntary Employee’s Beneficiary Association, et al. v. Opendoor Technologies Inc., et al.
The plaintiffs seek class certification, an award of unspecified compensatory damages, an award of interest and reasonable costs and expenses, including attorneys’ fees and expert fees, and other and further relief as the court may deem just and proper. We believe that the allegations in the complaints are without merit and we intend to vigorously defend ourselves in the matter.
The plaintiffs seek class certification, an award of unspecified compensatory damages, an award of interest and reasonable costs and expenses, including attorneys’ fees and expert fees, and other and further relief as the court may deem just and proper. The defendants filed motions to dismiss on June 30, 2023, which are pending before the court.
Removed
Item 3. Legal Proceedings. In August 2019, the FTC began conducting an investigation into the Company related primarily to statements in Opendoor’s advertising and website comparing selling homes to Opendoor with selling homes in a traditional manner using an agent and relating to statements that Opendoor’s offers reflect or are based on market prices.
Added
(Case No. 2:22-cv-01987-GMS) (“Oakland County”), respectively. The lawsuits were consolidated into a single action, captioned In re Opendoor Technologies Inc. Securities Litigation (Case No. 2:22-CV-01717-MTL). The consolidated amended complaint names as defendants the Company, Social Capital Hedosophia Holdings Corp.
Removed
Opendoor and the FTC began discussing resolution of this matter in December 2020. After extensive negotiations, the Company agreed to enter into a consent order resolving all aspects of the inquiry, which became final on October 21, 2022.
Added
We believe that the allegations in the complaint are without merit and we intend to vigorously defend ourselves in the matter. On March 1, 2023 and March 15, 2023, shareholder derivative lawsuits were filed in the United States District Court for the District of Arizona, captioned Carlson v. Rice, et al. (Case No. 2:23-cv-00367-GMS) and Van Dorn v.
Removed
Pursuant to the consent order, the Company did not admit to any wrongdoing and is required to possess competent and reliable supporting data prior to making statements regarding the costs, savings, repair costs, or financial benefits of Company services related to assisting consumers selling homes.
Added
Wu, et al. (Case No. 2:23-cv-00455-DMF), respectively, which were subsequently consolidated into a single action, captioned Carlson v. Rice (Case No. 2:23-CV-00367-GMS). Plaintiffs voluntarily dismissed the matter on June 22, 2023, and thereafter re-filed complaints in the Court of Chancery of the State of Delaware, captioned Carlson v. Rice, et al. (Case No. 2023-0642) and Van Dorn v.
Removed
The consent order also required that the Company pay the FTC $62 million (an amount the Company previously accrued) and that it retain certain records and submit a compliance report to the FTC. The $62 million fine was paid in October 2022. 36 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC.
Added
Rice, et al. (Case No. 2023-0643).The cases have been consolidated into a single action, captioned Opendoor Technologies Inc. Stockholder Derivative Litigation (Case No. 2023-0642). On June 29, 2023, a shareholder derivative lawsuit was filed in the United States District Court for the District of Delaware, captioned Juul v. Wu, et al. (Case No. 1:23-cv-00705-UNA).
Added
The complaints in each matter are based on the same facts and circumstances as In re Opendoor Technologies Inc. Securities Litigation and name certain officers and directors of the Company as defendants. The defendants are alleged to have violated Section 10(b) of the Exchange Act and SEC Rule 10b-5 and breached fiduciary duties.
Added
The plaintiffs seek to maintain the derivative actions on behalf of the Company, an award of unspecified compensatory damages, an order directing the Company to reform its corporate governance and internal procedures, restitutionary relief, an award of interest and expenses, including attorneys’ fees and expert fees, and other and further relief as the court may deem just and proper.
Added
These derivative actions have been stayed pending further developments in In re Opendoor Technologies Inc. Securities Litigation . On October 13, 2023, a shareholder derivative lawsuit was filed in the United States District Court for the District of Delaware, captioned Woods, et al. v. Bain, et al . (Case No. 1:23-cv-01158-UNA).
Added
The complaint is based on facts and circumstances related to In re Opendoor Technologies Inc. Securities Litigation .
Added
The plaintiffs have brought claims against certain current and former directors and officers of the Company for breaches of fiduciary duty, contribution under Sections 10(b) and 21D of the Exchange Act, and violations of Section 14(a) of the Exchange Act and SEC Rule 14a-9 promulgated thereunder.
Added
The plaintiffs seek to maintain the derivative action on behalf of the Company, an award of unspecified compensatory damages, an order directing one of the defendants to disgorge monies allegedly obtained from certain personal sales of Company stock, equitable relief, an award of interest and expenses, including attorneys’ fees and expert fees, and other and further relief as the court may deem just and proper.
Added
This derivative action has been stayed pending further developments in In re Opendoor Technologies Inc. Securities Litigation. On October 18, 2023, a shareholder derivative lawsuit was filed in the United States District Court for the District of Arizona, captioned Gera v. Palihapitiya, et al . (Case No. 2:23-cv-02164-SMB).
Added
The complaint is based on facts and circumstances related to In re Opendoor Technologies Inc. Securities Litigation , and names as defendants certain current and former officers and directors of the Company and SCH Sponsor II LLC. The complaint alleges that the defendants violated Section 14(a) of the Exchange Act and SEC Rule 14a-9 promulgated thereunder.
Added
The plaintiff seeks to maintain the derivative action on behalf of the Company, an award of unspecified compensatory damages, an order directing the Company to reform certain corporate governance and internal procedures, restitution, an award of cost and expenses, including attorneys’ fees and expert fees, and other and further relief as the court may deem just and proper. 39 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

4 edited+0 added−3 removed4 unchanged
Biggest changeAny such determination will also depend upon our business prospects, results of operations, financial condition, cash requirements and availability and other factors that our board of directors may deem relevant.
Biggest changeAny such determination will also depend upon our business prospects, results of operations, financial condition, cash requirements and availability and other factors that our board of directors may deem relevant. Sales of Unregistered Equity Securities None. Issuer Purchases of Equity Securities None.
This graph assumes that 38 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC. the value of the investment in the Company’s common stock and each index (including reinvestment of dividends) was $100 on December 21, 2020.
This graph assumes that 41 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC. the value of the investment in the Company’s common stock and each index (including reinvestment of dividends) was $100 on December 21, 2020.
This graph covers the period from December 21, 2020, which was the first day our common stock began trading after the closing of the Business Combination, through December 31, 2022 for the Company’s common stock.
This graph covers the period from December 21, 2020, which was the first day our common stock began trading after the closing of the Business Combination, through December 31, 2023 for the Company’s common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information for Common Stock Our common stock is listed on the Nasdaq Global Select Market (“Nasdaq”) under the symbol “OPEN.” Holders of Record As of February 16, 2023, there were approximately 61 holders of record of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information for Common Stock Our common stock is listed on the Nasdaq Global Select Market (“Nasdaq”) under the symbol “OPEN.” Holders of Record As of February 8, 2024, there were approximately 61 holders of record of our common stock.
Removed
Sales of Unregistered Equity Securities On July 28, 2022, in connection with our entry into a multi-year agreement with Zillow, Inc., we issued to Zillow, Inc. a warrant representing the right to purchase up to 6 million shares of the Company’s common stock, which will vest in tranches for resale marketing services with respect to homes that qualify for a referral fee under the agreement.
Removed
The exercise price per tranche of warrant shares will equal the 30-day trailing volume weighted average price prior to the vesting date, subject to a floor of $15.00 per share and a cap of $30.00 per share.
Removed
We believe the issuance of the warrant was exempt from registration pursuant to Section 4(a)(2) of the Securities Act as a transaction by the Company not involving any public offering. Issuer Purchases of Equity Securities None.

Item 7. Management's Discussion & Analysis

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

128 edited+50 added−63 removed82 unchanged
Biggest changeFinancial Highlights Year Ended December 31, (in millions, except percentages, homes sold, number of markets, and homes in inventory) 2022 2021 2020 2021 to 2022 Change 2020 to 2021 Change Revenue $ 15,567 $ 8,021 $ 2,583 $ 7,546 $ 5,438 Homes sold 39,183 21,725 9,913 17,458 11,812 Gross profit $ 667 $ 730 $ 220 $ (63) $ 510 Gross margin 4.3 % 9.1 % 8.5 % Net loss $ (1,353) $ (662) $ (253) $ (691) $ (409) Adjusted Net Loss $ (574) $ (116) $ (175) $ (458) $ 59 Contribution Profit $ 525 $ 525 $ 110 $ — $ 415 Contribution Margin 3.4 % 6.5 % 4.3 % Adjusted EBITDA $ (168) $ 58 $ (98) $ (226) $ 156 Adjusted EBITDA Margin (1.1) % 0.7 % (3.8) % Number of markets (at period end) 53 44 21 9 23 Inventory (at period end) $ 4,460 $ 6,096 $ 466 $ (1,636) $ 5,630 Homes in inventory (at period end) 12,788 17,009 1,826 (4,221) 15,183 Current Housing Environment The residential real estate market started 2022 quite strong with housing transaction volume, velocity, and home price appreciation (HPA) trending at or near historical highs.
Biggest changeFinancial Highlights and Operating Metrics Year Ended December 31, (in millions, except percentages, homes purchased, homes sold, number of markets, and homes in inventory) 2023 2022 2021 2022 to 2023 Change 2021 to 2022 Change Revenue $ 6,946 $ 15,567 $ 8,021 $ (8,621) $ 7,546 Gross profit $ 487 $ 667 $ 730 $ (180) $ (63) Gross margin 7.0 % 4.3 % 9.1 % Net loss $ (275) $ (1,353) $ (662) $ 1,078 $ (691) Number of markets (at period end) 50 53 44 (3) 9 Homes sold 18,708 39,183 21,725 (20,475) 17,458 Homes purchased 11,246 34,962 36,908 (23,716) (1,946) Homes in inventory (at period end) 5,326 12,788 17,009 (7,462) (4,221) Inventory (at period end) $ 1,775 $ 4,460 $ 6,096 $ (2,685) $ (1,636) Percentage of homes “on the market” for greater than 120 days (at period end) 18 % 55 % 8 % Non-GAAP Financial Highlights (1) Contribution (Loss) Profit $ (258) $ 525 $ 525 $ (783) $ — Contribution Margin (3.7) % 3.4 % 6.5 % Adjusted EBITDA $ (627) $ (168) $ 58 $ (459) $ (226) Adjusted EBITDA Margin (9.0) % (1.1) % 0.7 % Adjusted Net Loss $ (778) $ (574) $ (116) $ (204) $ (458) ________________ (1) See “— Non-GAAP Financial Measures ” for further details and a reconciliation of such non-GAAP measures to their nearest comparable GAAP measures.
Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Forward-Looking Statements,” “Risk Factors” or in other parts of this Annual Report on Form 10-K. Overview Opendoor’s mission is to power life’s progress, one move at a time.
Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Forward-Looking Statements,” “Risk Factors,” or in other parts of this Annual Report on Form 10-K. Overview Opendoor’s mission is to power life’s progress, one move at a time.
We believe that Adjusted Gross Profit and Contribution Profit are useful financial measures for investors as they are supplemental measures used by management in evaluating unit level economics and our operating performance. Each of these measures is intended to present the economics related to homes sold during a given period.
We believe that Adjusted Gross Profit and Contribution Profit (Loss) are useful financial measures for investors as they are supplemental measures used by management in evaluating unit level economics and our operating performance. Each of these measures is intended to present the economics related to homes sold during a given period.
Contribution Profit provides investors a measure to assess Opendoor’s ability to generate returns on homes sold during a reporting period after considering home purchase costs, renovation and repair costs, holding costs and selling costs. Adjusted Gross Profit and Contribution Profit are supplemental measures of our operating performance and have limitations as analytical tools.
Contribution Profit (Loss) provides investors a measure to assess Opendoor’s ability to generate returns on homes sold during a reporting period after considering home purchase costs, renovation and repair costs, holding costs and selling costs. Adjusted Gross Profit and Contribution Profit (Loss) are supplemental measures of our operating performance and have limitations as analytical tools.
We include a reconciliation of these measures to the most directly comparable GAAP financial measure, which is net loss. Adjusted Net Loss We calculate Adjusted Net Loss as GAAP net loss adjusted to exclude non-cash expenses of stock-based compensation, equity securities fair value adjustment, derivative and warrant fair value adjustment, and intangibles amortization expense.
We include a reconciliation of these measures to the most directly comparable GAAP financial measure, which is net loss. Adjusted Net Loss We calculate Adjusted Net Loss as GAAP net loss adjusted to exclude non-cash expenses of stock-based compensation, equity securities fair value adjustment, warrant fair value adjustment, and intangibles amortization expense.
Our calculation of Adjusted Net Loss does not currently include the tax effects of the non-GAAP adjustments because our taxes and such tax effects have not been material to date. Adjusted EBITDA We calculated Adjusted EBITDA as Adjusted Net Loss adjusted for depreciation and amortization, property financing and other interest expense, interest income, and income tax expense.
Our calculation of Adjusted Net Loss does not currently include the tax effects of the non-GAAP adjustments because our taxes and such tax effects have not been material to date. Adjusted EBITDA / Margin We calculated Adjusted EBITDA as Adjusted Net Loss adjusted for depreciation and amortization, property financing and other interest expense, interest income, and income tax expense.
For the year ended December 31, 2021, cash used in operating activities was primarily driven by a $5.7 billion increase in real estate inventory and an $83 million increase in escrow receivables correlated to the increase in revenue during the year.
For the year ended December 31, 2021, cash used in operating activities was primarily driven by an $5.7 billion increase in real estate inventory and an $83 million increase in escrow receivables correlated to the increase in revenue during the year.
Adjusted Gross Profit and Contribution Profit To provide investors with additional information regarding our margins and return on inventory acquired, we have included Adjusted Gross Profit and Contribution Profit, which are non-GAAP financial measures.
Adjusted Gross Profit and Contribution Profit (Loss) To provide investors with additional information regarding our margins and return on inventory acquired, we have included Adjusted Gross Profit and Contribution Profit (Loss), which are non-GAAP financial measures.
We believe our cash, cash equivalents, and marketable securities together with cash we expect to generate from future operations and borrowings, will be sufficient to meet our working capital and capital expenditure requirements for a period of at least twelve months from the date of this Annual Report on Form 10-K.
We believe our cash, cash equivalents, and marketable securities together with cash we expect to generate from future operations and borrowings, will be sufficient to meet our working capital and capital expenditure requirements for a period of at least 12 months from the date of this Annual Report on Form 10-K.
It excludes expenses that are not directly related to our revenue-generating operations such as restructuring charges and legal contingency accruals.
It excludes expenses that are not directly related to our revenue-generating operations such as restructuring and legal contingency accruals.
We consider all available evidence, both positive and negative, including historical levels of income, expectations and risks associated with estimates of future taxable income and ongoing tax planning strategies in assessing the need for a valuation allowance. 48 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC.
We consider all available evidence, both positive and negative, including historical levels of income, expectations and risks associated with estimates of future taxable income and ongoing tax planning strategies in assessing the need for a valuation allowance. 51 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC.
The terms of our inventory financing facilities require an Opendoor subsidiary to comply with customary financial covenants, such as maintaining certain levels of liquidity, tangible net worth or leverage (ratio of debt to tangible net worth). As of December 31, 2022, the Company was in compliance with all financial covenants.
The terms of our inventory financing facilities require an Opendoor subsidiary to comply with customary financial covenants, such as maintaining certain levels of liquidity, tangible net worth or leverage (ratio of debt to tangible net worth). As of December 31, 2023, the Company was in compliance with all financial covenants.
The discussion should be read together with the historical audited annual consolidated financial statements as of December 31, 2022 and 2021 and for the years ended December 31, 2022, 2021, and 2020. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties.
The discussion should be read together with the historical audited annual consolidated financial statements as of December 31, 2023 and 2022 and for the years ended December 31, 2023, 2022, and 2021. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties.
Income Tax Expense Income tax expense increased by a nominal amount for the year ended December 31, 2021 compared to the year ended December 31, 2020. Liquidity and Capital Resources Overview Our principal sources of liquidity have historically consisted of cash generated from our operations and from financing activities.
Income Tax Expense Income tax expense increased by a nominal amount for the year ended December 31, 2022 compared to the year ended December 31, 2021. Liquidity and Capital Resources Overview Our principal sources of liquidity have historically consisted of cash generated from our operations and from financing activities.
Other (Loss) Income — Net Other (loss) income – net decreased by $48 million, or 126%, for the year ended December 31, 2022 compared to the year ended December 31, 2021. The decrease is primarily related to the fair value adjustments recorded on marketable equity securities.
Other (Loss) Income — Net Other (loss) income – net decreased by $48 million, or 126%, for the year ended December 31, 2022 compared to the year ended December 31, 2021. The decrease was primarily related to the fair value adjustments recorded on marketable equity securities.
Our asset-backed senior debt facilities generally provide for advance rates of 80% to 90% against our cost basis in the underlying properties upon acquisition. Our mezzanine term facilities may finance up to 95% to 100% of our cost basis in the underlying properties upon acquisition.
Our asset-backed senior debt facilities generally provide for advance rates of 75% to 90% against our cost basis in the underlying properties upon acquisition. Our mezzanine term facilities may finance up to 95% to 100% of our cost basis in the underlying properties upon acquisition.
These measures have limitations as analytical tools when assessing our operating performance and should not be considered in isolation or as a substitute for GAAP measures, including gross profit and net income.
These measures have limitations as analytical tools when assessing our operating performance and should not be considered in isolation or as a substitute for GAAP measures, including gross profit and net loss.
Asset-backed Senior Term Debt Facilities We classify our senior term debt facilities as non-current liabilities in our consolidated balance sheets. The carrying value of the non-current liabilities is reduced by issuance costs of $17 million.
Asset-backed Senior Term Debt Facilities We classify our senior term debt facilities as non-current liabilities in our consolidated balance sheets. The carrying value of the non-current liabilities is reduced by issuance costs of $12 million.
Based on the quantitative analysis, the Company recorded a goodwill impairment charge of $60 million for the year ended December 31, 2022. There was no impairment of goodwill identified for the years ended December 31, 2021 and 2020. Restructuring. Restructuring increased by $17 million for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Based on the quantitative analysis, the Company recorded a goodwill impairment charge of $60 million for the year ended December 31, 2022. There was no impairment of goodwill identified for the year ended December 31, 2021. Restructuring. Restructuring increased by $17 million for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Our performance in 2022 reflects the sharp transition in the housing market from peak levels earlier this year to lower transaction velocity and home price appreciation well beyond typical seasonal trends. Given these macroeconomic pressures, we have been focused on managing for overall inventory health and risk.
Our performance in 2023 reflects the sharp transition in the housing market from peak levels earlier in 2022 to lower transaction velocity and home price appreciation well beyond typical seasonal trends. Given these macroeconomic pressures, we have been focused on managing overall inventory health and risk.
Derivative and Warrant Fair Value Adjustment Derivative and warrant fair value adjustment decreased by $12 million, or 100%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Warrant Fair Value Adjustment Warrant fair value adjustment decreased by $12 million, or 100%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.
We will continue to evaluate new ways to improve our end-to-end solution and expect to invest in additional adjacent products and services over time with the expectation that these adjacent services will continue to improve our unit economics and Contribution Margin. Unit Economics We view Contribution Margin as a key measure of unit economic performance.
We will continue to evaluate new ways to improve our end-to-end solution and expect to invest in additional adjacent products and services over time with the expectation that these adjacent services will continue to improve our unit economics. Unit Economics We view Contribution Margin as a key measure of unit economic performance. Contribution Margin is a non-GAAP financial measure.
(11) Consists mainly of interest earned on cash, cash equivalents and marketable securities. Components of Our Results of Operations Revenue We generate the majority of our revenue from the sale of homes that we previously acquired from homeowners.
(10) Consists mainly of interest earned on cash, cash equivalents, restricted cash and marketable securities. Components of Our Results of Operations Revenue We generate the majority of our revenue from the sale of homes that we previously acquired from homeowners.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (Tabular amounts in millions, except share and per share data and ratios,or as noted) Results of Operations Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 The following table sets forth our results of operations for the years ended December 31, 2022 and 2021: Year Ended December 31, Change in (in millions, except percentages) 2022 2021 $ % Revenue $ 15,567 $ 8,021 $ 7,546 94 % Cost of revenue 14,900 7,291 7,609 104 % Gross profit 667 730 (63) (9) % Operating expenses: Sales, marketing and operations 1,006 544 462 85 % General and administrative 346 620 (274) (44) % Technology and development 169 134 35 26 % Goodwill impairment 60 — 60 N/M Restructuring 17 — 17 N/M Total operating expenses 1,598 1,298 300 23 % Net operating loss (931) (568) (363) 64 % Derivative and warrant fair value adjustment — 12 (12) (100) % Loss on extinguishment of debt (25) — (25) N/M Interest expense (385) (143) (242) 169 % Other (loss) income-net (10) 38 (48) (126) % Loss before income taxes (1,351) (661) (690) 104 % Income tax expense (2) (1) (1) 100 % Net loss $ (1,353) $ (662) $ (691) 104 % N/M - Not meaningful.
Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 The following table sets forth our results of operations for the years ended December 31, 2022 and 2021: Year Ended December 31, Change in (in millions, except percentages) 2022 2021 $ % Revenue $ 15,567 $ 8,021 $ 7,546 94 % Cost of revenue 14,900 7,291 7,609 104 % Gross profit 667 730 (63) (9) % Operating expenses: Sales, marketing and operations 1,006 544 462 85 % General and administrative 346 620 (274) (44) % Technology and development 169 134 35 26 % Goodwill impairment 60 — 60 N/M Restructuring 17 — 17 N/M Total operating expenses 1,598 1,298 300 23 % Net operating loss (931) (568) (363) 64 % Warrant fair value adjustment — 12 (12) (100) % Loss on extinguishment of debt (25) — (25) N/M Interest expense (385) (143) (242) 169 % Other (loss) income-net (10) 38 (48) (126) % Loss before income taxes (1,351) (661) (690) 104 % Income tax expense (2) (1) (1) 100 % Net loss $ (1,353) $ (662) $ (691) 104 % N/M - Not meaningful.
Interest Expense Interest expense increased by $75 million, or 110%, for the year ended December 31, 2021 compared to the year ended December 31, 2020. The increase was primarily attributable to increases in the average outstanding balances of our asset-backed senior debt facilities and mezzanine term debt facilities, which is consistent with our increase in inventory over the same periods.
Interest Expense Interest expense increased by $242 million, or 169%, for the year ended December 31, 2022 compared to the year ended December 31, 2021. The increase was primarily attributable to increases in the average outstanding balances of our asset-backed senior debt facilities and mezzanine term debt facilities, which is consistent with our increase in inventory over the same periods.
Our ability to service our debt, fund working capital, business operations and capital expenditures will depend on our ability to generate cash from operating activities, which is subject to our future operating success, and obtain inventory acquisition financing on reasonable terms, which is subject to factors beyond our control, including general economic, political and financial market conditions.
Our ability to service our debt and fund working capital, business operations and capital expenditures will depend on our ability to generate cash from operating activities, which is subject to our future operating success, and ability to obtain inventory acquisition financing on reasonable terms, which is subject to factors beyond our control, including potential economic recession, rising interest rates, inflation and general economic, political and financial market conditions.
We sold 39,183 homes during the year ended December 31, 2022, compared to 21,725 homes during the year ended December 31, 2021, representing an increase of 80%. Revenue per home sold increased 8% between periods due to inventory mix, buybox expansion and home price appreciation.
We sold 39,183 homes during the year ended December 31, 2022, compared to 21,725 homes during the year ended December 31, 2021, representing an increase of 80%. Revenue per home sold increased 8% between periods due to inventory mix, buybox expansion and home price appreciation. 54 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC.
In addition, gross margin and Adjusted Gross Margin for the year ended December 31, 2021 benefited from a fresh book of inventory after we sold down our inventory in response to the COVID-19 pandemic and more favorable macroeconomic conditions as compared to the year ended December 31, 2022. 49 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC.
In addition, gross margin and Adjusted Gross Margin for the year ended December 31, 2021 benefited from a fresh book of inventory after we sold down our inventory in response to the COVID-19 pandemic and more favorable macroeconomic conditions as compared to the year ended December 31, 2022.
Net Cash Provided by (Used in) Investing Activities Net cash provided by (used in) investing activities was $234 million, $(476) million and $(22) million for the years ended December 31, 2022, 2021 and 2020, respectively.
Net Cash Provided by (Used in) Investing Activities Net cash provided by (used in) investing activities was $44 million, $234 million and $(476) million for the years ended December 31, 2023, 2022 and 2021, respectively.
The maximum initial advance rates vary by facility and generally decrease on a fixed timeline that varies by facility based on the length of time a given property has been financed and other facility-specific adjustments, including adjustments based on collateral performance.
The maximum initial advance rates vary by facility and generally decrease on a fixed timeline that varies by facility based on the length of time a given property has been financed and other facility-specific adjustments, including adjustments based on collateral performance. 57 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (Tabular amounts in millions, except share and per share data and ratios,or as noted) Cash Flows The following table summarizes our cash flows for the years ended December 31, 2022, 2021 and 2020: Year Ended December 31, (in millions) 2022 2021 2020 Net cash provided by (used in) operating activities $ 730 $ (5,794) $ 682 Net cash provided by (used in) investing activities $ 234 $ (476) $ (22) Net cash (used in) provided by financing activities $ (1,751) $ 7,342 $ 161 Net (decrease) increase in cash, cash equivalents, and restricted cash $ (787) $ 1,072 $ 821 Net Cash Provided by (Used in) Operating Activities Net cash provided by (used in) operating activities was $730 million, $(5.8) billion and $682 million for the years ended December 31, 2022, 2021 and 2020, respectively.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (Tabular amounts in millions, except share and per share data and ratios,or as noted) Cash Flows The following table summarizes our cash flows for the years ended December 31, 2023, 2022 and 2021: Year Ended December 31, (in millions) 2023 2022 2021 Net cash provided by (used in) operating activities $ 2,344 $ 730 $ (5,794) Net cash provided by (used in) investing activities $ 44 $ 234 $ (476) Net cash (used in) provided by financing activities $ (2,639) $ (1,751) $ 7,342 Net (decrease) increase in cash, cash equivalents, and restricted cash $ (251) $ (787) $ 1,072 Net Cash Provided by (Used in) Operating Activities Net cash provided by (used in) operating activities was $2.3 billion, $730 million and $(5.8) billion for the years ended December 31, 2023, 2022 and 2021, respectively.
In some cases, the borrowing capacity amounts under the asset-backed senior revolving credit facilities as reflected in the table are not fully committed and any borrowings above the committed amounts are subject to the applicable lender’s discretion. As of December 31, 2022, we had committed borrowing capacity with respect to asset-backed senior revolving credit facilities of $3.2 billion.
In some cases, the borrowing capacity amounts under the asset-backed senior revolving credit facilities as reflected in the table are not fully committed and any borrowings above the committed amounts are subject to the applicable lender’s discretion. As of December 31, 2023, we had committed borrowing capacity with respect to asset-backed senior revolving credit facilities of $650 million.
Management elected to use the simplified method instead of historical experience due to a lack of relevant historical data resulting from changes in option vesting schedules and changes in the pool of employees receiving option grants. • Expected Volatility.
We use the simplified method when calculating the expected term due to insufficient historical exercise data. Management elected to use the simplified method instead of historical experience due to a lack of relevant historical data resulting from changes in option vesting schedules and changes in the pool of employees receiving option grants. • Expected Volatility.
The borrowing capacity amounts under the asset-backed mezzanine term debt facilities as reflected in the table are not fully committed and any borrowing above the committed amounts are subject to the applicable lender's discretion. As of December 31, 2022, we had committed borrowing capacity with respect to asset-backed mezzanine term debt facilities of $1.2 billion.
The borrowing capacity amounts under the asset-backed mezzanine term debt facilities as reflected in the table are not fully committed and any borrowing above the committed amounts are subject to the applicable lender’s discretion. As of December 31, 2023, we had committed borrowing capacity with respect to asset-backed mezzanine term debt facilities of $750 million.
If the carrying amount for a given home is not expected to be recovered, an inventory valuation adjustment is recorded to cost of revenue and the home’s carrying value is adjusted to its net realizable value. Inventory valuation 59 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC.
If the carrying amount for a given home is not expected to be recovered, an inventory valuation adjustment is recorded to cost of revenue and the home’s carrying value is adjusted to its net realizable value.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (Tabular amounts in millions, except share and per share data and ratios,or as noted) The following table presents a reconciliation of our Adjusted Net Loss and Adjusted EBITDA to our net loss, which is the most directly comparable GAAP measure, for the periods indicated: Year Ended December 31, (in millions, except percentages) 2022 2021 2020 Net loss (GAAP) $ (1,353) $ (662) $ (253) Adjustments: Stock-based compensation 171 536 38 Equity securities fair value adjustment (1) 35 (35) — Derivative and warrant fair value adjustment (1) — (12) (8) Intangibles amortization expense (2) 9 4 4 Inventory valuation adjustment – Current Period (3)(4) 458 39 — Inventory valuation adjustment – Prior Periods (3)(5) (39) — (11) Restructuring (6) 17 — 31 Convertible note PIK interest and discount amortization (7) — — 8 Loss on extinguishment of debt 25 — 11 Gain on lease termination — (5) — Goodwill impairment 60 — — Payroll tax on initial RSU release — 5 — Legal contingency accrual and related expenses 46 14 4 Other (8) (3) — 1 Adjusted Net Loss $ (574) $ (116) $ (175) Adjustments: Depreciation and amortization, excluding amortization of intangibles 41 33 22 Property financing (9) 329 119 38 Other interest expense (10) 56 24 22 Interest income (11) (22) (3) (5) Income tax expense 2 1 — Adjusted EBITDA $ (168) $ 58 $ (98) Adjusted EBITDA Margin (1.1) % 0.7 % (3.8) % ________________ (1) Represents the gains and losses on certain financial instruments, which are marked to fair value at the end of each period.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (Tabular amounts in millions, except share and per share data and ratios, or as noted) The following table presents a reconciliation of our Adjusted Net Loss and Adjusted EBITDA to our net loss, which is the most directly comparable GAAP measure, for the periods indicated: Year Ended December 31, (in millions, except percentages) 2023 2022 2021 Revenue (GAAP) $ 6,946 $ 15,567 $ 8,021 Net loss (GAAP) $ (275) $ (1,353) $ (662) Adjustments: Stock-based compensation 126 171 536 Equity securities fair value adjustment (1) 1 35 (35) Warrant fair value adjustment (1) — — (12) Intangibles amortization expense (2) 7 9 4 Inventory valuation adjustment – Current Period (3)(4) 23 458 39 Inventory valuation adjustment – Prior Periods (3)(5) (455) (39) — Restructuring (6) 14 17 — (Gain) loss on extinguishment of debt (216) 25 — Goodwill impairment — 60 — Payroll tax on initial RSU release — — 5 Legal contingency accrual and related expenses — 46 14 Other (7) (3) (3) (5) Adjusted Net Loss $ (778) $ (574) $ (116) Adjustments: Depreciation and amortization, excluding amortization of intangibles 45 41 33 Property financing (8) 174 329 119 Other interest expense (9) 37 56 24 Interest income (10) (106) (22) (3) Income tax expense 1 2 1 Adjusted EBITDA $ (627) $ (168) $ 58 Adjusted EBITDA Margin (9.0) % (1.1) % 0.7 % ________________ (1) Represents the gains and losses on certain financial instruments, which are marked to fair value at the end of each period.
Subject to market conditions and cost of capital trade-offs, we will evaluate opportunities to expand our sources of financing over time, which may allow us to diversify our mix of financing sources to include more cost effective financing relative to our higher cost mezzanine term debt facilities.
We expect our overall interest expense to increase as inventory increases. Subject to market conditions and cost of capital trade-offs, we will evaluate opportunities to expand our sources of financing over time, which may allow us to diversify our mix of financing sources to include more cost effective financing relative to our higher cost mezzanine term debt facilities.
Adjusted EBITDA is a supplemental performance measure that our management uses to assess our operating performance and the operating leverage in our business. 45 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC.
Adjusted EBITDA is a supplemental performance measure that our management uses to assess our operating performance and the operating leverage in our business. Adjusted EBITDA Margin is Adjusted EBITDA as a percentage of revenue. 48 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC.
In addition, we received $978 million in proceeds from the issuance of the 2026 Notes, net of $25 million of issuance costs and offset by $119 million purchase of the Capped Calls related to the 2026 Notes.
In addition, we received $978 million in proceeds from the issuance of the 2026 Notes, net of $25 million of issuance costs and offset by $119 million purchase of the Capped Calls related to the 2026 Notes. 61 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC.
Income Tax Expense Income tax expense increased by a nominal amount for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Income Tax Expense Income tax expense decreased by a nominal amount for the year ended December 31, 2023 compared to the year ended December 31, 2022.
These amounts may fluctuate due to seasonality, timing of property acquisitions and resales, and the outstanding loan balances under our asset-backed term debt facilities. 54 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC.
These amounts may fluctuate due to seasonality, timing of property acquisitions and resales, and the outstanding loan balances under our asset-backed term debt facilities.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (Tabular amounts in millions, except share and per share data and ratios,or as noted) in a given market based on characteristics such as price range, home type, home location, year built and lot size (which we refer to as our “buybox".) This metric is impacted by the mix of homes in our inventory.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (Tabular amounts in millions, except share and per share data and ratios, or as noted) in a given market based on characteristics such as price range, home type, home location, year built and lot size (which we refer to as our “buybox”).
Debt and Financing Arrangements Our financing activities include: short-term borrowings under our asset-backed senior revolving credit facilities and, prior to the discontinuation of our mortgage origination business, our mortgage repurchase financing; the issuance of long-term asset-backed senior term debt, asset-backed mezzanine term debt, and convertible debt; and new issuances of equity.
Debt and Financing Arrangements Our financing activities include: short-term borrowings under our asset-backed senior revolving credit facilities; the issuance of long-term asset-backed senior term debt, asset-backed mezzanine term debt, and convertible debt; and new issuances of equity.
The following table presents a reconciliation of our Adjusted Gross Profit and Contribution Profit to our gross profit, which is the most directly comparable GAAP measure, for the periods indicated: Year Ended December 31, (in millions, except percentages) 2022 2021 2020 Gross profit (GAAP) $ 667 $ 730 $ 220 Gross Margin 4.3 % 9.1 % 8.5 % Adjustments: Inventory valuation adjustment – Current Period (1)(2) 458 39 — Inventory valuation adjustment – Prior Periods (1)(3) (39) — (11) Restructuring in cost of revenue (4) — — 2 Adjusted Gross Profit $ 1,086 $ 769 $ 211 Adjusted Gross Margin 7.0 % 9.6 % 8.2 % Adjustments: Direct selling costs (5) (414) (195) (73) Holding costs on sales – Current Period (6)(7) (109) (47) (17) Holding costs on sales – Prior Periods (6)(8) (38) (2) (11) Contribution Profit $ 525 $ 525 $ 110 Contribution Margin 3.4 % 6.5 % 4.3 % ________________ (1) Inventory valuation adjustment includes adjustments to record real estate inventory at the lower of its carrying amount or its net realizable value.
The following table presents a reconciliation of our Adjusted Gross Profit and Contribution Profit to our gross profit, which is the most directly comparable GAAP measure, for the periods indicated: Year Ended December 31, (in millions, except percentages) 2023 2022 2021 Revenue (GAAP) $ 6,946 $ 15,567 $ 8,021 Gross profit (GAAP) $ 487 $ 667 $ 730 Gross Margin 7.0 % 4.3 % 9.1 % Adjustments: Inventory valuation adjustment – Current Period (1)(2) 23 458 39 Inventory valuation adjustment – Prior Periods (1)(3) (455) (39) — Adjusted Gross Profit $ 55 $ 1,086 $ 769 Adjusted Gross Margin 0.8 % 7.0 % 9.6 % Adjustments: Direct selling costs (4) (197) (414) (195) Holding costs on sales – Current Period (5)(6) (50) (109) (47) Holding costs on sales – Prior Periods (5)(7) (66) (38) (2) Contribution Profit (Loss) $ (258) $ 525 $ 525 Contribution Margin (3.7) % 3.4 % 6.5 % ________________ (1) Inventory valuation adjustment includes adjustments to record real estate inventory at the lower of its carrying amount or its net realizable value.
Our long-term financial performance depends, in part, on continuing to maintain and expand unit margins through the following initiatives: • Optimization and enhancements of our pricing engine • Platform efficiency improvements through greater automation and self-service • Incremental attach of services, which supplement the core transaction margin profile • Expansion of our 3P product offering, which will reduce our inventory exposure and capital intensity, and eliminate any holding and selling costs associated with taking ownership of the home Inventory Management Effectively managing our overall inventory position and balancing growth, margin, and risk are critical to our financial performance.
Our long-term financial performance depends, in part, on continuing to maintain and expand unit margins through the following initiatives: • Optimization and enhancements of our pricing engine; • Platform efficiency improvements through greater automation and self-service; • Incremental attach of services, which supplement the core transaction margin profile; and • Expansion of our listing and marketplace product offerings, which will reduce our inventory exposure and capital intensity, and eliminate the holding and selling costs associated with taking ownership of the home.
As of December 31, 2022, such homes represented 55% of our portfolio, compared to 33% for the broader market when filtered for the types of homes we are able to underwrite and acquire 42 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC.
As of December 31, 2023, such homes represented 18% of our portfolio, compared to 21% for the broader market when filtered for the types of homes we are able to underwrite and acquire 45 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC.
Derivative and Warrant Fair Value Adjustment Derivative and warrant fair value adjustment consists of unrealized and realized gains and losses as a result of marking our warrants and embedded derivatives related to the 2019 Convertible Notes to fair value at the end of each reporting period and subsequent settlement through exercise of warrants and conversion of the 2019 Convertible Notes to equity.
Warrant Fair Value Adjustment Warrant fair value adjustment consists of unrealized and realized gains and losses as a result of marking our warrants to fair value at the end of each reporting period and subsequent settlement through exercise of warrants to equity.
Under this method, deferred income tax assets and liabilities are recorded based on the estimated future tax effects of differences between the financial statement and income tax basis of existing assets and liabilities.
Income Tax Expense We record income taxes using the asset and liability method. Under this method, deferred income tax assets and liabilities are recorded based on the estimated future tax effects of differences between the financial statement and income tax basis of existing assets and liabilities.
It excludes loss on extinguishment of debt as these expenses were incurred as a result of decisions made by management to repay portions of our outstanding credit facilities early; these expenses are not reflective of ongoing operating results and vary in frequency and amount.
It excludes (gain) loss on extinguishment of debt as these expenses or gains were incurred as a result of decisions made by management to repay portions of our outstanding credit facilities and the 0.25% convertible senior notes due in 2026 (the "2026 Notes") early; these expenses are not reflective of ongoing operating results and vary in frequency and amount.
For homes under resale contract, the net realizable value is the contract price less expected selling costs and any expected concessions. For all other homes, the net realizable value is our internal projection price less expected selling costs.
For homes under resale contract, the net realizable value is the contract price less expected selling costs and any expected concessions. For all other homes, the net realizable value is our internal projection price less expected selling 62 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC.
Adjusted Net Loss also aligns the timing of inventory valuation adjustments recorded under GAAP to the period in which the related revenue is recorded in order to improve the comparability of this measure to our non-GAAP financial measures of unit economics, as described above.
It also excludes non-recurring payroll tax on initial RSU release, and goodwill impairment. Adjusted Net Loss also aligns the timing of inventory valuation adjustments recorded under GAAP to the period in which the related revenue is recorded in order to improve the comparability of this measure to our non-GAAP financial measures of unit economics, as described above.
Contribution Profit / Margin We calculate Contribution Profit as Adjusted Gross Profit, minus certain costs incurred on homes sold during the current period including: (1) holding costs incurred in the current period, (2) holding costs incurred in prior periods, and (3) direct selling costs. The composition of our holding costs is described in the footnotes to the reconciliation table below.
Contribution Profit / Margin We calculate Contribution Profit (Loss) as Adjusted Gross Profit, minus certain costs incurred on homes sold during the current period including: (1) holding costs incurred in the current period, (2) holding costs incurred in prior periods, and (3) direct selling costs.
We typically seek to maximize the resale margin performance of our inventory in the context of managing overall risk and inventory health through monitoring sell-through rates, holding periods, and portfolio aging.
As part of our overall risk management framework, we consider both individual market and aggregate portfolio exposures. We typically seek to maximize the resale margin performance of our inventory in the context of managing overall risk and inventory health through monitoring sell-through rates, holding periods, and portfolio aging.
Technology and Development Expense Technology and development expense consists primarily of headcount expenses, including salaries, benefits and stock-based compensation for employees in the design, development, testing, maintenance and operation of our websites, tools, applications, and mobile apps that support our products. Technology and development expense also includes amortization of capitalized software development costs. 47 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC.
Technology and Development Expense Technology and development expense consists primarily of headcount expenses, including salaries, benefits and stock-based compensation for employees in the design, development, testing, maintenance and operation of our mobile applications, websites, tools, applications, and mobile apps that support our products.
Given the fact that we operate in a highly fragmented industry and offer a differentiated value proposition to the incumbent agent-led transaction, we believe there is significant opportunity to expand our share in our existing cities.
Given the fact that we operate in a highly fragmented industry and offer a differentiated value proposition to the traditional offline selling process, we believe there is significant opportunity to expand our share in our existing markets.
(3) The Company’s Other Current Liabilities include the following liabilities as shown in the Consolidated Balance Sheets: Accounts Payable and Other Accrued Liabilities, $110 million; Interest Payable, $12 million; and Lease Liabilities - Current, $7 million. 57 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC.
(2) The Company’s consolidated Other Current Liabilities include the following liabilities as shown in the Consolidated Balance Sheets: Accounts Payable and Other Accrued Liabilities, $64 million; Interest Payable, $1 million; and Lease Liabilities - Current, $5 million. 60 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC.
The increase was primarily attributable to a $219 million increase in resale transaction costs and broker commissions, consistent with the 94% increase in revenue. Property holding costs increased by $91 million, consistent with increased inventory levels and longer inventory holding periods compared to the year ended December 31, 2021 when we held a fresh book of inventory.
Property holding costs increased by $91 million, consistent with increased inventory levels and longer inventory holding periods compared to the year ended December 31, 2021 when we held a fresh book of inventory.
(2) Represents the principal amounts outstanding as of December 31, 2022 and estimated interest payments assuming the principal balances remain outstanding until maturity. The final maturity dates of the senior and mezzanine term debt facilities vary, as discussed above.
The final maturity dates of the senior and mezzanine term debt facilities vary, as discussed above. (2) Represents the principal amounts outstanding as of December 31, 2023 and interest payments assuming the principal balances remain outstanding until maturity. (3) Represents future payments for long-term operating leases that have commenced as of December 31, 2023.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (Tabular amounts in millions, except share and per share data and ratios,or as noted) Loss on Extinguishment of Debt Loss on extinguishment of debt decreased by $11 million, or 100%, for the year ended December 31, 2021 compared to the year ended December 31, 2020.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (Tabular amounts in millions, except share and per share data and ratios, or as noted) Interest Expense Interest expense decreased by $174 million, or 45%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.
In some cases, the borrowing capacity amounts under the asset-backed senior term debt facilities as reflected in the table are not fully committed and any borrowings above the committed amounts are subject to the applicable lender’s discretion.
In some cases, the borrowing capacity amounts under the asset-backed senior term debt facilities as reflected in the table are not fully committed and any borrowings above the 58 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC.
As of December 31, 2022, we had cash and cash equivalents of $1.1 billion, restricted cash of $654 million, and marketable securities of $144 million.
As of December 31, 2023, we had cash and cash equivalents of $1.0 billion, restricted cash of $541 million, and marketable securities of $69 million.
Factors Affecting our Business Performance Market Penetration in Existing Markets Residential real estate is one of the largest consumer markets, with approximately $1.9 trillion of home value transacted annually.
Factors Affecting our Business Performance Market Penetration in Existing Markets Residential real estate is one of the largest consumer markets in the United States, of which less than 1% of the estimated $1.6 trillion of home value transacted annually is conducted online.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (Tabular amounts in millions, except share and per share data and ratios,or as noted) The following table summarizes certain details related to our non-recourse asset-backed debt and other secured borrowings as of December 31, 2022 (in millions, except interest rates): Outstanding Amount December 31, 2022 Borrowing Capacity Current Non-Current Weighted Average Interest Rate End of Revolving / Withdrawal Period Final Maturity Date Non-Recourse Asset-backed Debt: Asset-backed Senior Revolving Credit Facilities Revolving Facility 2018-2 $ 1,000 $ 472 $ — 4.86 % June 7, 2024 June 7, 2024 Revolving Facility 2018-3 1,000 194 — 3.98 % October 20, 2025 October 20, 2025 Revolving Facility 2019-1 900 55 — 4.41 % June 30, 2023 June 30, 2023 Revolving Facility 2019-2 1,850 167 — 3.92 % July 8, 2023 July 8, 2024 Revolving Facility 2019-3 925 — — 3.86 % April 5, 2024 April 4, 2025 Revolving Facility 2022-1 525 289 — 8.15 % December 31, 2022 October 31, 2023 Asset-backed Senior Term Debt Facilities Term Debt Facility 2021-S1 400 — 400 3.48 % April 1, 2024 April 1, 2025 Term Debt Facility 2021-S2 600 — 500 3.20 % September 10, 2024 September 10, 2025 Term Debt Facility 2021-S3 1,000 — 750 3.75 % January 31, 2027 July 31, 2027 Term Debt Facility 2022-S1 250 — 250 4.07 % March 1, 2025 September 1, 2025 Term Debt Facility 2022-S2 500 200 — 8.48 % January 31, 2023 December 31, 2023 Total $ 8,950 $ 1,377 $ 1,900 Issuance Costs (1) (17) Carrying Value $ 1,376 $ 1,883 Asset-backed Mezzanine Term Debt Facilities Term Debt Facility 2020-M1 $ 2,500 $ — $ 1,000 10.00 % April 1, 2025 April 1, 2026 Term Debt Facility 2022-M1 $ 500 $ — $ 150 10.00 % September 15, 2025 September 15, 2026 Total $ 3,000 $ — $ 1,150 Issuance Costs (13) Carrying Value $ 1,137 Total Non-Recourse Asset-backed Debt $ 11,950 $ 1,376 $ 3,020 Asset-backed Senior Revolving Credit Facilities We classify the senior revolving credit facilities as current liabilities on our consolidated balance sheets.
The following table summarizes certain details related to our non-recourse asset-backed debt and other secured borrowings as of December 31, 2023 (in millions, except interest rates): Outstanding Amount December 31, 2023 Borrowing Capacity Current Non-Current Weighted Average Interest Rate End of Revolving / Withdrawal Period Final Maturity Date Non-Recourse Asset-backed Debt: Asset-backed Senior Revolving Credit Facilities Revolving Facility 2018-2 $ 1,000 $ — $ — 7.49 % June 30, 2025 June 30, 2025 Revolving Facility 2018-3 1,000 — — 6.82 % September 29, 2026 September 29, 2026 Revolving Facility 2019-1 300 — — 7.34 % August 15, 2025 August 15, 2025 Revolving Facility 2019-2 550 — — 6.83 % October 3, 2025 October 2, 2026 Revolving Facility 2019-3 925 — — — % April 5, 2024 April 4, 2025 Asset-backed Senior Term Debt Facilities Term Debt Facility 2021-S1 100 — 100 3.48 % January 2, 2025 April 1, 2025 Term Debt Facility 2021-S2 400 — 300 3.20 % September 10, 2025 March 10, 2026 Term Debt Facility 2021-S3 1,000 — 750 3.75 % January 31, 2027 July 31, 2027 Term Debt Facility 2022-S1 250 — 250 4.07 % March 1, 2025 September 1, 2025 Total $ 5,525 $ — $ 1,400 Issuance Costs — (12) Carrying Value $ — $ 1,388 Asset-backed Mezzanine Term Debt Facilities Term Debt Facility 2020-M1 $ 2,100 $ — $ 600 10.00 % April 1, 2025 April 1, 2026 Term Debt Facility 2022-M1 $ 500 $ — $ 150 10.00 % September 15, 2025 September 15, 2026 Total $ 2,600 $ — $ 750 Issuance Costs (4) Carrying Value $ 746 Total Non-Recourse Asset-backed Debt $ 8,125 $ — $ 2,134 Asset-backed Senior Revolving Credit Facilities We classify the senior revolving credit facilities as current liabilities on our consolidated balance sheets.
Adjusted Gross Profit / Margin We calculate Adjusted Gross Profit as gross profit under GAAP adjusted for (1) inventory valuation adjustment in the current period, (2) inventory valuation adjustment in prior periods, and (3) restructuring in cost of revenue. Restructuring in 43 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC.
Adjusted Gross Profit / Margin We calculate Adjusted Gross Profit as gross profit under GAAP adjusted for (1) inventory valuation adjustment in the current period and (2) inventory valuation adjustment in prior periods.
For the year ended December 31, 2020, cash provided by operating activities was primarily driven by an $834 million reduction in real estate inventory offset by our net loss net of non-cash items of $149 million.
For the year ended December 31, 2023, cash provided by operating activities was primarily driven by a $2.6 billion decrease in real estate inventory, partially offset by our net loss, net of non-cash items, of $214 million.
Adjacent Services We believe home sellers and buyers value simplicity and certainty. To that end, we are building an online, integrated suite of home services, which currently include title insurance and escrow services, brokerage services and mortgage services.
Adjacent Services We believe home sellers and buyers value simplicity and certainty. To that end, we are building an online, integrated suite of home services, which currently includes title insurance, escrow services and real estate brokerage services. Our success with title insurance and escrow services helps validate our view that customers prefer an online, integrated experience.
Other (Loss) Income — Net Other (loss) income-net consists primarily of changes in fair value of, and dividend income, from our investment in equity securities as well as interest income from our investment in money market funds, time deposits, and debt securities. Income Tax Expense We record income taxes using the asset and liability method.
Other Income (Loss) — Net Other income (loss) – net consists primarily of interest income on our Cash and Restricted cash balances and from our investment in money market funds, time deposits, and debt securities as well as changes in fair value of, and dividend income, from our investment in equity securities.
We primarily rely on our access to non-recourse asset-backed debt, which consists of asset-backed senior debt facilities and asset-backed mezzanine term debt facilities, to finance our home acquisitions.
Inventory Financing Our business model is working capital intensive and inventory financing is a key enabler of our growth. We primarily rely on our access to non-recourse asset-backed debt, which consists of asset-backed senior debt facilities and asset-backed mezzanine term debt facilities, to finance our home acquisitions.
Certain of our asset-backed senior term debt facilities also have additional extension options that are subject to lender approval that are not reflected in the table above.
The withdrawal period end dates and final maturity dates reflected in the table above are inclusive of any extensions that are at the sole discretion of the Company. Certain of our asset-backed senior term debt facilities also have additional extension options that are subject to lender approval that are not reflected in the table above.
For the year ended December 31, 2020, cash used in investing activities primarily consisted of capital expenditures. Net Cash (Used in) Provided by Financing Activities Net cash (used in) provided by financing activities was $(1.8) billion, $7.3 billion and $161 million for the years ended December 31, 2022, 2021 and 2020, respectively.
Net Cash (Used in) Provided by Financing Activities Net cash (used in) provided by financing activities was $(2.6) billion, $(1.8) billion and $7.3 billion for the years ended December 31, 2023, 2022 and 2021, respectively.
Contribution Margin is Contribution Profit as a percentage of revenue. We view this metric as an important measure of business performance as it captures the unit level performance isolated to homes sold in a given period and provides comparability across reporting periods. Contribution Profit helps management assess inflows and outflows directly associated with a specific resale cohort.
The composition of our holding costs is described in the footnotes to the reconciliation table below. Contribution Margin is Contribution Profit (Loss) as a percentage of revenue. We view this metric as an important measure of business performance as it captures the unit level performance isolated to homes sold in a given period and provides comparability across reporting periods.
The amounts involved and total consideration paid may be material. We have incurred losses from inception through December 31, 2022 and expect to incur additional losses in the future.
We have incurred losses from inception through December 31, 2023 and expect to incur additional losses in the future.
We also expect to launch our new partnership agreement with Zillow, Inc. in early 2023 that will allow home sellers on the Zillow, Inc. platform to request an offer directly from Opendoor, which will create an additional channel for us to drive brand awareness and acquire customers.
We launched our partnership agreement with Zillow, Inc. in early 2023, allowing home sellers on the Zillow, Inc. platform to request an offer directly from Opendoor, and creating an additional channel for us to drive brand awareness and acquire customers. As of December 31, 2023, our partnership was live in 45 markets.
Sales, marketing and operations increased by $355 million, or 188%, for the year ended December 31, 2021 compared to the year ended December 31, 2020. The increase was primarily attributable to a $123 million increase in resale transactions costs and broker commissions, consistent with the 119% increase in the number of homes sold.
Operating Expenses Sales, Marketing and Operations . Sales, marketing and operations increased by $462 million, or 85%, for the year ended December 31, 2022 compared to the year ended December 31, 2021. The increase was primarily attributable to a $219 million increase in resale transaction costs and broker commissions, consistent with the 94% increase in revenue.
At times, we may be required to keep amounts in restricted cash accounts to collateralize our asset-backed term debt facilities if the property borrowing base is insufficient to satisfy the borrowing base requirements.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (Tabular amounts in millions, except share and per share data and ratios,or as noted) At times, we may be required to keep amounts in restricted cash accounts to collateralize our asset-backed term debt facilities if the property borrowing base is insufficient to satisfy the borrowing base requirements.
(5) Represents selling costs incurred related to homes sold in the relevant period. This primarily includes broker commissions, external title and escrow-related fees and transfer taxes. (6) Holding costs include mainly property taxes, insurance, utilities, homeowners association dues, cleaning and maintenance costs. Holding costs are included in Sales, marketing, and operations on the Consolidated Statements of Operations.
(5) Holding costs include mainly property taxes, insurance, utilities, homeowners association dues, cleaning and maintenance costs. Holding costs are included in Sales, marketing, and operations on the Consolidated Statements of Operations. (6) Represents holding costs incurred in the period presented on homes sold in the period presented. 47 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC.
Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 1. Description of Business and Accounting Policies” . 61 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC.
Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 11. Shareholders’ Equity” . 63 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC.
These measures are also commonly used by investors and analysts to compare the underlying performance of companies in our industry.
Adjusted Net Loss and Adjusted EBITDA We also present Adjusted Net Loss and Adjusted EBITDA, which are non-GAAP financial measures that management uses to assess our underlying financial performance. These measures are also commonly used by investors and analysts to compare the underlying performance of companies in our industry.
See “— Non-GAAP Financial Measures .” Operating Expenses Sales, Marketing and Operations . Sales, marketing and operations increased by $462 million, or 85%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.
See “— Non-GAAP Financial Measures ” for further details and a reconciliation of such non-GAAP measures to their nearest comparable GAAP measures. Operating Expenses Sales, Marketing and Operations . Sales, marketing and operations decreased by $520 million, or 52%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Revenue Revenue increased by $5.4 billion, or 211%, for the year ended December 31, 2021 compared to the year ended December 31, 2020. The increase in revenue was primarily attributable to higher sales volumes in 2021 compared to 2020, as well as higher revenue per home.
Revenue Revenue decreased by $8.6 billion, or 55%, for the year ended December 31, 2023 compared to the year ended December 31, 2022. The decrease in revenue was primarily attributable to lower sales volumes as well as lower revenue per home.

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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 changeThe Company had total outstanding balances on our asset-backed debt and other secured borrowings of $4.4 billion, 69% of which was fixed rate with an average duration of 3.3 years and the remaining 31% was based on a floating rate.
Biggest changeAs of December 31, 2023, the Company had total outstanding balances on our asset-backed debt of $2.2 billion, with an average duration of 2.6 years. Total interest expense for the year ended December 31, 2023 was $174 million, of which $156 million was fixed and $18 million was floating.
However, if our costs were to become subject to significant incremental inflationary pressure, we may not be able to fully offset such higher costs by adjusting our operational model or our pricing methodology. Our inability to do so could harm our business, results of operations, and financial condition. 62 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC.
However, if our costs were to become subject to significant incremental inflationary pressure, we may not be able to fully offset such higher costs by adjusting our operational model or our pricing methodology. Our inability to do so could harm our business, results of operations, and financial condition. 65 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC.
Accordingly, fluctuations in market interest rates may increase or decrease our interest expense. We may use interest rate cap derivatives, interest rate swaps, or other interest rate hedging instruments to economically hedge and manage interest rate risk with respect to our variable floating rate debt. Many of our floating rate debt facilities also have Benchmark Rate floors.
Accordingly, fluctuations in market interest rates may increase or decrease our interest expense. We may use interest rate cap derivatives, interest rate swaps, or other interest rate hedging instruments to economically hedge and manage interest rate risk with respect to our variable floating rate debt. Many of our floating rate debt facilities also had benchmark rate floors.
Inflation Risk We believe the inflation experienced in the last year has impacted the cost of goods and services that we consume, such as labor and materials costs for home repairs. We endeavor to offset these impacts in our business through appropriately considering them in our pricing and operational models.
Inflation Risk We believe the inflation experienced in 2022, which is still ongoing, has impacted the cost of goods and services that we consume, such as labor and materials costs for home repairs. We endeavor to offset these impacts in our business through appropriately considering them in our pricing and operational models.
Assuming no change in the outstanding borrowings on our credit facilities, we estimate that a one percentage point increase in the applicable Benchmark Rates would increase our annual interest expense by approximately $14 million and $37 million for the years ended December 31, 2022 and 2021, respectively.
Assuming no change in the outstanding borrowings on our credit facilities as of December 31, 2022, we estimate that a one percentage point increase in the applicable benchmark rate would have increased our annual interest expense by approximately $14 million.
As of December 31, 2022 and December 31, 2021, we had outstanding borrowings of $1.4 billion and $4.2 billion, respectively, which bear interest at floating benchmark reference rates (“Benchmark Rates”), based on a London Interbank Offered Rate (“LIBOR”) or the secured overnight financing rate (“SOFR”), plus an applicable margin.
As of December 31, 2023, 100% of our outstanding borrowings were at a fixed rate and did not utilize floating benchmark reference rates. As of December 31, 2022, we had outstanding borrowings of $1.4 billion, which bore interest at floating benchmark reference rates based on the secured overnight financing rate (“SOFR”), plus an applicable margin.
Removed
Total interest expense for the year ended December 31, 2022 was $329 million, of which $134 million was fixed and $195 million was floating.
Added
Assuming no change in the outstanding borrowings on our credit facilities as of December 31, 2023, we estimate that a one percentage point increase in applicable benchmark rates would not have resulted in an impact on our annual interest expense.
Added
However, we would be subject to fluctuation in interest rates in the future if we draw down under our senior revolving credit facilities.

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