Opendoor CFO: 2021 a 'breakout year,' 2022 housing market outlook 'robust'

CFO Carrie Ann Wheeler says housing inventory is as low as its been since 1980.
Written by Tiernan Ray, Senior Contributing Writer

Home sales technology pioneer Opendoor this afternoon reported Q4 revenue and profit that both easily topped Wall Street's expectations, and an outlook for this quarter higher as well, as its inventory of homes surged over 1,000 percent. 

The report sent Opendoor shares down 9% in late trading. 

Following the report, CFO Carrie Ann Wheeler spoke to ZDNet by phone, stating "2021 was an important breakout year for us, a record performance, and proof positive that customers are craving a certain solution, and that two, we can deliver, at scale, managing a complicated system."

Added Wheeler, "we met all the expectations, and we're set up for more of the same in 2022; given what we guided to in Q1, we're off to a very good start. "

The only obviously troubling element for investors in the report was the decline in Opendoor's "contribution margin," a key measure of profitability. The company defines contribution margin as adjusted gross profit minus holding costs for its inventory of homes, and selling costs. That percentage declined from 12.6% in the December, 2020, quarter,  to 4%.

Wheeler told ZDNet that the company has several times alerted investors that the contribution profit margin would decline this year from an artificially high level. Contribution margin had been boosted at the end of 2020 as the company was low on homes inventory, which meant that its holding costs were also much lower. 


"We're not dismissive of the fact that rates are expected to rise," says Opendoor CFO Carrie Ann Wheeler, "but there are some really important counter-balancing forces in housing right now, one being that inventory is as low as it's ever been."


"We've been talking about this all year, and we've called out that our margins would moderate," she said. "What's most important is that we've been very clear that we can definitely deliver the business within the 4% to 6% contribution margin baseline," said Wheeler. 

Wheeler said the company has been tracking ahead of its near-term goals by reporting a full-year contribution margin for 2021 of 6.5%.

In addition, the company is on a path to a long-term goal of contribution margin in a range of 7% to 9%, and Ebitda margin of 4% to 6%, she said.

The higher margin will be a result of adding services to the business, including mortgage financing, and "Opendoor Complete," which is the company's offer to combine in a single transaction buying a consumer's home and helping them find a new home to buy. 

"We're well on our way to getting there," she said of the long-term goal. 

Asked about rising interest rates, Wheeler said, "Our outlook for 2022 housing remains really quite robust."

Wheeler said the company is "not dismissive of the fact that rates are expected to rise, but there are some really important counter-balancing forces in housing right now, one being that inventory is as low as it's ever been."

You go back to 1980 and it's really stark. There is very little inventory on the market. And then you look at things like demand indicators, you look at purchase mortgage applications, they're higher than they've been for the last decade except for 2021, and we're seeing really strong demand for our homes. So, we're very constructive on the outlook for housing for the year. Obviously, at some point, housing should normalize. The most important point is, what we're really driven by, ultimately, is capturing share across housing cycles because of the secular share shift we're seeing from offline to online. And that's really the core driver to our business.  

Revenue in the three months ended in December rose to $3.8 billion, yielding a net loss of 13 cents a share, excluding some costs.

Analysts had been modeling $3.17 billion and an 18-cent loss per share.

Opendoor said its total inventory of homes at quarter's end rose by 1,208%, year over year, to 17,009 homes.

For the current quarter, the company sees revenue of $4.1 billion to $4.3 billion, and adjusted Ebitda of $30 million to $40 million. That compares to consensus for $3.3 billion and $12 million in Ebitda.

In prepared remarks, Opendoor CEO and co-founder Eric Wu remarked, "In 2021, we saw a significant and durable shift in demand for our digital product, demonstrated our market leadership, and delivered exceptional results.

"By consistently outperforming expectations, we pulled forward our financial targets by years, growing revenue 211% year-on-year and exiting 2021 at a revenue run-rate of over $15 billion."

Added Wu, 

And yet, we are still just scratching the surface of our opportunity to transform one of the largest, most antiquated industries in the U.S. In 2022, we will continue to build the best consumer experience, expand nationwide to service more customers, and become the digital one-stop-shop that homeowners love and choose. It is our fundamental belief that in a matter of years, millions of homebuyers and home sellers will pick a simple, certain, and fast experience and transact themselves, completely online. More importantly, we know Opendoor's digital, seamless experience is and will continue to be what consumers choose now and for decades to come.

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