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Technology real estate company Offerpad (NYSE:OPAD) missed analysts' expectations in Q2 CY2024, with revenue up 9.1% year on year to $251.1 million. Next quarter's revenue guidance of $205 million also underwhelmed, coming in 34.2% below analysts' estimates. It made a GAAP loss of $0.50 per share, improving from its loss of $0.82 per share in the same quarter last year.
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Offerpad (OPAD) Q2 CY2024 Highlights:
- Revenue: $251.1 million vs analyst estimates of $283.6 million (11.4% miss)
- EPS: -$0.50 vs analyst expectations of -$0.38 (31.2% miss)
- Revenue Guidance for Q3 CY2024 is $205 million at the midpoint, below analyst estimates of $311.5 million
- Gross Margin (GAAP): 8.7%, down from 9.7% in the same quarter last year
- Adjusted EBITDA Margin: -1.8%, up from -7.5% in the same quarter last year
- Free Cash Flow was -$54.39 million, down from $2.03 million in the previous quarter
- Homes Sold: 742, up 92 year on year
- Market Capitalization: $109.2 million
Known for giving homeowners cash offers within 24 hours, Offerpad (NYSE:OPAD) operates a tech-enabled platform specializing in direct home buying and selling solutions.
Real Estate ServicesTechnology has been a double-edged sword in real estate services. On the one hand, internet listings are effective at disseminating information far and wide, casting a wide net for buyers and sellers to increase the chances of transactions. On the other hand, digitization in the real estate market could potentially disintermediate key players like agents who use information asymmetries to their advantage.
Sales GrowthExamining a company's long-term performance can provide clues about its business quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Offerpad struggled to generate demand over the last four years as its sales dropped by 4.9% annually, a rough starting point for our analysis.
Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. Offerpad's recent history shows its demand has stayed suppressed as its revenue has declined by 48.8% annually over the last two years.
Offerpad also discloses its number of homes sold and homes purchased, which clocked in at 742 and 831 in the latest quarter. Over the last two years, Offerpad's homes sold averaged 35.5% year-on-year declines while its homes purchased averaged 23% year-on-year declines.
This quarter, Offerpad's revenue grew 9.1% year on year to $251.1 million, missing Wall Street's estimates. The company is guiding for a 12.5% year-on-year revenue decline next quarter to $205 million, an improvement from the 71.5% year-on-year decrease it recorded in the same quarter last year. Looking ahead, Wall Street expects sales to grow 35.6% over the next 12 months, an acceleration from this quarter.
Cash Is KingAlthough earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can't use accounting profits to pay the bills.
Offerpad has shown robust cash profitability, giving it an edge over its competitors and the ability to reinvest or return capital to investors. The company's free cash flow margin averaged 18.7% over the last two years, quite impressive for a consumer discretionary business. The divergence from its underwhelming operating margin stems from the add-back of non-cash charges like depreciation and stock-based compensation. GAAP operating profit expenses these line items, but free cash flow does not.
Offerpad burned through $54.39 million of cash in Q2, equivalent to a negative 21.7% margin. The company's cash burn was in line with the same quarter last year and is a deviation from its longer-term margin, raising some eyebrows.
Over the next year, analysts predict Offerpad will continue burning cash, albeit to a lesser extent. Their consensus estimates imply its free cash flow margin of negative 16% for the last 12 months will increase to negative 1.9%.
Key Takeaways from Offerpad's Q2 Results We struggled to find many strong positives in these results. Its revenue guidance for next quarter missed and its revenue fell short of Wall Street's estimates. Overall, this was a mediocre quarter for Offerpad. The stock traded down 6.4% to $3.65 immediately following the results.
