With billions saved — and misplaced — Opendoor resides by the creed “go massive or go dwelling.” But even after a dreary This autumn, the iBuyer persists, which stands out as the greatest takeaway, Mike DelPrete writes completely for Intel.
This report is accessible completely to subscribers of Inman Intel, a knowledge and analysis arm of Inman providing deep insights and market intelligence on the enterprise of residential actual property and proptech. Subscribe at present.
Final week Opendoor posted its This autumn monetary outcomes, revealing mega losses alongside early indicators of a doable turnaround.
Mike DelPrete
Why it issues: In 2022, Opendoor skilled a completely devastating take a look at of its enterprise mannequin – a worst case situation occasion – and survived.
Behind the numbers: Opendoor posted a internet lack of $1.4 billion in 2022, on prime of already sizable historic losses.
- Opendoor, and plenty of different venture-funded disruptors, are burning billions of {dollars} to develop new enterprise fashions – and the dearth of profitability simply doesn’t matter.
- Essentially the most noteworthy truth is that Opendoor misplaced $1.4 billion in 2022 and remains to be working (albeit with a brand new CEO).
Money is king: Manufactured monetary metrics apart, Opendoor has loads of (however not limitless) money reserves.
- Opendoor ended 2022 with $1.3 billion in money, money equivalents, and marketable securities – down from $2.2 billion initially of the yr.
- That’s a money burn of $934 million – large losses, however a situation that Opendoor was in a position to climate with out elevating extra capital (or going bankrupt).
Like many corporations, Opendoor is racing to chop its working bills as rapidly as doable.
- In November, it laid off about 18 % of workers, and only in the near past introduced it had decreased its run-rate bills by roughly $110 million.
- Working bills are trending considerably decrease – a optimistic signal for a corporation seeking to preserve money (be aware: gross sales, advertising and marketing and operations flex up and down based mostly on the variety of dwelling gross sales).
Mike DelPrete
The point of interest upon which the way forward for the enterprise rests is when Opendoor will flip the nook and cease promoting houses for a loss.
- Houses that Opendoor bought in Q3 and This autumn are performing significantly better, with optimistic gross margins.
- Sure, however: The primary houses to promote at all times have the perfect gross margins – over time, with value reductions, gross margins fall – as expertly illustrated by Datadoor.io.
Mike DelPrete
What to observe: Money, money, money – Opendoor’s future as a going concern rests on its potential to fund loss-making operations.
- With $1.3 billion within the financial institution and the worst behind it, the corporate seems to have loads of runway.
The underside line: Opendoor is enjoying a high-stakes recreation of disruption.
- With billions within the financial institution and billions in losses, the corporate resides by the creed “go massive or go dwelling.”
- After experiencing its single largest problem in a difficult historical past, Opendoor persists – which stands out as the greatest takeaway from a brutal yr.
Mike DelPrete is a strategic adviser and world professional in actual property tech, together with zavvie, an iBuyer supply aggregator. Join with him on LinkedIn.
