10-Q 1 opad-20240331.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission File Number: 001-39641

 

img223553162_0.jpg 

Offerpad Solutions Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

85-2800538

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

2150 E. Germann Road, Suite 1, Chandler, Arizona

85286

(Address of principal executive offices)

(Zip Code)

(844) 388-4539

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Class A common stock, $0.0001 par value per share

 

OPAD

 

The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

As of April 29, 2024, there were 27,301,933 shares of Offerpad’s Class A common stock outstanding.

 

 

 


 

OFFERPAD SOLUTIONS INC.

FORM 10-Q

FOR THE QUARTER ENDED March 31, 2024

TABLE OF CONTENTS

 

 

 

Page

Cautionary Note Regarding Forward-Looking Statements

3

 

 

 

PART I.

FINANCIAL INFORMATION

4

Item 1.

Financial Statements

4

 

Condensed Consolidated Balance Sheets

4

 

Condensed Consolidated Statements of Operations

5

 

Condensed Consolidated Statements of Changes in Stockholders’ Equity

6

 

Condensed Consolidated Statements of Cash Flows

7

 

Notes to Condensed Consolidated Financial Statements

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

21

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

32

Item 4.

Controls and Procedures

32

 

 

 

PART II.

OTHER INFORMATION

33

Item 1.

Legal Proceedings

33

Item 1A.

Risk Factors

33

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

33

Item 3.

Defaults Upon Senior Securities

33

Item 4.

Mine Safety Disclosures

33

Item 5.

Other Information

33

Item 6.

Exhibits

34

 

 

 

SIGNATURES

35

 

 

 


 

Unless the context otherwise requires, references in this Quarterly Report on Form 10-Q to “Offerpad,” the “Company,” “we,” “us,” and “our,” and similar references refer to the business and operations of Offerpad Solutions Inc. and its consolidated subsidiaries following the consummation of the business combination (the “Business Combination”) with Supernova Partners Acquisition Company, Inc. (“Supernova”) and to OfferPad, Inc. (“Old OfferPad”) and its consolidated subsidiaries prior to the Business Combination.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q includes statements that express Offerpad’s opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results and therefore are, or may be deemed to be, forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements can generally be identified by the use of forward-looking terminology, including the terms “believes,” “estimates,” “anticipates,” “expects,” “seeks,” “projects,” “intends,” “plans,” “may” or “should” or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They may appear in a number of places throughout this Quarterly Report on Form 10-Q, including Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our future results of operations, financial condition and liquidity, our prospects, potential growth or expansion evaluations, strategies, including product and service offerings, macroeconomic trends, geopolitical concerns, and the markets in which Offerpad operates.

The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to:

our ability to respond to general economic conditions;
the health of the U.S. residential real estate industry;
our ability to grow market share in our existing markets or any new markets we may enter;
our ability to grow effectively;
our ability to accurately value and manage real estate inventory, and to maintain an adequate and desirable supply of real estate inventory;
our ability to successfully launch new product and service offerings, and to manage, develop and refine our technology platform;
our ability to maintain and enhance our products and brand, and to attract customers;
our ability to achieve and maintain profitability in the future; and
the success of strategic relationships with third parties.

The foregoing list of factors is not exhaustive. You should carefully consider the foregoing factors and other risks and uncertainties discussed in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

The forward-looking statements in this Quarterly Report on Form 10-Q are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed as exhibits to this Quarterly Report on Form 10-Q with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q.

 

 

 

Offerpad Solutions Inc. | First Quarter 2024 Form 10-Q | 3


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

OFFERPAD SOLUTIONS INC.

Condensed Consolidated Balance Sheets

 

 

 

 

 

March 31,

 

 

December 31,

 

(in thousands, except par value per share) (Unaudited)

 

 

 

2024

 

 

2023

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

$

68,550

 

 

$

75,967

 

Restricted cash

 

 

 

 

9,983

 

 

 

3,967

 

Accounts receivable

 

 

 

 

4,347

 

 

 

9,935

 

Real estate inventory

 

 

 

 

266,107

 

 

 

276,500

 

Prepaid expenses and other current assets

 

 

 

 

4,353

 

 

 

5,236

 

Total current assets

 

 

 

 

353,340

 

 

 

371,605

 

Property and equipment, net

 

 

 

 

4,679

 

 

 

4,517

 

Other non-current assets

 

 

 

 

11,707

 

 

 

3,572

 

TOTAL ASSETS

 

(1)

 

$

369,726

 

 

$

379,694

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

 

 

$

4,378

 

 

$

4,946

 

Accrued and other current liabilities

 

 

 

 

13,166

 

 

 

13,859

 

Secured credit facilities and other debt, net

 

 

 

 

230,083

 

 

 

227,132

 

Secured credit facilities and other debt - related party

 

 

 

 

24,522

 

 

 

30,092

 

Total current liabilities

 

 

 

 

272,149

 

 

 

276,029

 

Warrant liabilities

 

 

 

 

127

 

 

 

471

 

Other long-term liabilities

 

 

 

 

9,349

 

 

 

1,418

 

Total liabilities

 

(2)

 

 

281,625

 

 

 

277,918

 

Commitments and contingencies (Note 16)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Class A common stock, $0.0001 par value; 2,000,000 shares authorized; 27,300 and 27,233 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

 

 

 

 

3

 

 

 

3

 

Additional paid in capital

 

 

 

 

503,500

 

 

 

499,660

 

Accumulated deficit

 

 

 

 

(415,402

)

 

 

(397,887

)

Total stockholders’ equity

 

 

 

 

88,101

 

 

 

101,776

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

$

369,726

 

 

$

379,694

 

________________

(1)
Our consolidated assets as of March 31, 2024 and December 31, 2023 include the following assets of certain variable interest entities (“VIEs”) that can only be used to settle the liabilities of those VIEs: Restricted cash, $9,883 and $3,867; Accounts receivable, $963 and $6,782; Real estate inventory, $266,107 and $276,500; Prepaid expenses and other current assets, $850 and $1,588; Total assets of $277,803 and $288,737, respectively.
(2)
Our consolidated liabilities as of March 31, 2024 and December 31, 2023 include the following liabilities for which the VIE creditors do not have recourse to Offerpad: Accounts payable, $1,707 and $1,798; Accrued and other current liabilities, $1,720 and $2,027; Secured credit facilities and other debt, net, $254,605 and $257,224; Total liabilities, $258,032 and $261,049, respectively.

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

Offerpad Solutions Inc. | First Quarter 2024 Form 10-Q | 4


 

OFFERPAD SOLUTIONS INC.

Condensed Consolidated Statements of Operations

 

 

 

Three Months Ended

 

 

 

March 31,

 

(in thousands, except per share data) (Unaudited)

 

2024

 

 

2023

 

Revenue

 

$

285,358

 

 

$

609,579

 

Cost of revenue

 

 

262,763

 

 

 

602,294

 

Gross profit

 

 

22,595

 

 

 

7,285

 

Operating expenses:

 

 

 

 

 

 

Sales, marketing and operating

 

 

22,452

 

 

 

42,351

 

General and administrative

 

 

11,955

 

 

 

14,479

 

Technology and development

 

 

1,773

 

 

 

2,241

 

Total operating expenses

 

 

36,180

 

 

 

59,071

 

Loss from operations

 

 

(13,585

)

 

 

(51,786

)

Other income (expense):

 

 

 

 

 

 

Change in fair value of warrant liabilities

 

 

344

 

 

 

(389

)

Interest expense

 

 

(4,905

)

 

 

(7,432

)

Other income, net

 

 

754

 

 

 

282

 

Total other expense

 

 

(3,807

)

 

 

(7,539

)

Loss before income taxes

 

 

(17,392

)

 

 

(59,325

)

Income tax expense

 

 

(123

)

 

 

(122

)

Net loss

 

$

(17,515

)

 

$

(59,447

)

Net loss per share, basic

 

$

(0.64

)

 

$

(2.51

)

Net loss per share, diluted

 

$

(0.64

)

 

$

(2.51

)

Weighted average common shares outstanding, basic

 

 

27,339

 

 

 

23,661

 

Weighted average common shares outstanding, diluted

 

 

27,339

 

 

 

23,661

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

Offerpad Solutions Inc. | First Quarter 2024 Form 10-Q | 5


 

OFFERPAD SOLUTIONS INC.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

 

 

 

Common Stock

 

 

Additional
Paid in

 

 

Accumulated

 

 

Total
Stockholders’

 

(in thousands) (Unaudited)

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2023

 

 

27,233

 

 

$

3

 

 

$

499,660

 

 

$

(397,887

)

 

$

101,776

 

Issuance of common stock upon exercise of stock options

 

 

5

 

 

 

 

 

 

16

 

 

 

 

 

 

16

 

Issuance of common stock upon vesting of restricted stock units

 

 

62

 

 

 

 

 

 

(43

)

 

 

 

 

 

(43

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

3,867

 

 

 

 

 

 

3,867

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(17,515

)

 

 

(17,515

)

Balance at March 31, 2024

 

 

27,300

 

 

$

3

 

 

$

503,500

 

 

$

(415,402

)

 

$

88,101

 

 

 

 

Common Stock

 

 

Additional
Paid in

 

 

Accumulated

 

 

Total
Stockholders’

 

(in thousands) (Unaudited)

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2022

 

 

16,479

 

 

$

2

 

 

$

402,544

 

 

$

(280,669

)

 

$

121,877

 

Issuance of common stock upon exercise of stock options

 

 

13

 

 

 

 

 

 

49

 

 

 

 

 

 

49

 

Issuance of common stock upon vesting of restricted stock units

 

 

14

 

 

 

 

 

 

(48

)

 

 

 

 

 

(48

)

Issuance of pre-funded warrants, net

 

 

 

 

 

 

 

 

89,216

 

 

 

 

 

 

89,216

 

Exercise of pre-funded warrants

 

 

10,001

 

 

 

1

 

 

 

10

 

 

 

 

 

 

11

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

1,843

 

 

 

 

 

 

1,843

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(59,447

)

 

 

(59,447

)

Balance at March 31, 2023

 

 

26,507

 

 

$

3

 

 

$

493,614

 

 

$

(340,116

)

 

$

153,501

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

Offerpad Solutions Inc. | First Quarter 2024 Form 10-Q | 6


 

OFFERPAD SOLUTIONS INC.

Condensed Consolidated Statements of Cash Flows

 

 

 

Three Months Ended

 

 

 

March 31,

 

($ in thousands) (Unaudited)

 

2024

 

 

2023

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(17,515

)

 

$

(59,447

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation

 

 

166

 

 

 

202

 

Amortization of debt financing costs

 

 

818

 

 

 

894

 

Real estate inventory valuation adjustment

 

 

624

 

 

 

7,285

 

Stock-based compensation

 

 

3,867

 

 

 

1,843

 

Change in fair value of warrant liabilities

 

 

(344

)

 

 

389

 

Change in fair value of derivative instruments

 

 

 

 

 

568

 

Gain on disposal of property and equipment

 

 

(5

)

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

5,588

 

 

 

(54

)

Real estate inventory

 

 

9,769

 

 

 

484,761

 

Prepaid expenses and other assets

 

 

670

 

 

 

(1,710

)

Accounts payable

 

 

(568

)

 

 

(228

)

Accrued and other liabilities

 

 

(684

)

 

 

(8,060

)

Net cash provided by operating activities

 

 

2,386

 

 

 

426,443

 

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(353

)

 

 

(75

)

Proceeds from sale of property and equipment

 

 

30

 

 

 

 

Purchases of derivative instruments

 

 

 

 

 

(1,212

)

Net cash used in investing activities

 

 

(323

)

 

 

(1,287

)

Cash flows from financing activities:

 

 

 

 

 

 

Borrowings from credit facilities and other debt

 

 

242,142

 

 

 

186,391

 

Repayments of credit facilities and other debt

 

 

(245,579

)

 

 

(700,635

)

Payment of debt financing costs

 

 

 

 

 

(23

)

Proceeds from exercise of stock options

 

 

16

 

 

 

49

 

Payments for taxes related to stock-based awards

 

 

(43

)

 

 

(48

)

Borrowings from warehouse lending facility

 

 

 

 

 

8,188

 

Repayments of warehouse lending facility

 

 

 

 

 

(5,657

)

Proceeds from issuance of pre-funded warrants

 

 

 

 

 

90,000

 

Proceeds from exercise of pre-funded warrants

 

 

 

 

 

11

 

Issuance cost of pre-funded warrants

 

 

 

 

 

(784

)

Net cash used in financing activities

 

 

(3,464

)

 

 

(422,508

)

Net change in cash, cash equivalents and restricted cash

 

 

(1,401

)

 

 

2,648

 

Cash, cash equivalents and restricted cash, beginning of period

 

 

79,934

 

 

 

140,299

 

Cash, cash equivalents and restricted cash, end of period

 

$

78,533

 

 

$

142,947

 

Reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheet:

 

 

 

 

 

 

Cash and cash equivalents

 

$

68,550

 

 

$

107,733

 

Restricted cash

 

 

9,983

 

 

 

35,214

 

Total cash, cash equivalents and restricted cash

 

$

78,533

 

 

$

142,947

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Cash payments for interest

 

$

6,427

 

 

$

11,064

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

Offerpad Solutions Inc. | First Quarter 2024 Form 10-Q | 7


OFFERPAD SOLUTIONS INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1. Nature of Operations and Significant Accounting Policies

Description of Business

Offerpad’s mission is to deliver the best home buying and selling experience. From cash offers and flexible listing options to mortgages and buyer services, we have been helping homeowners since 2015. We pair our local expertise in residential real estate with proprietary technology to put customers in control of the process and help find the right solution that fits their needs.

The Company is currently headquartered in Chandler, Arizona and operates in over 1,800 cities and towns in 27 metropolitan markets across 17 states as of March 31, 2024.

Basis of Presentation and Interim Financial Information

The accompanying unaudited interim condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Certain information and note disclosures required for annual financial statements have been condensed or excluded pursuant to GAAP and SEC rules and regulations. Accordingly, the unaudited interim condensed consolidated financial statements do not include all of the information and note disclosures required by GAAP for complete financial statements. Therefore, this information should be read in conjunction with the audited consolidated financial statements and related notes thereto included in the Company’s audited consolidated financial statements as of and for the year ended December 31, 2023 included in the Company’s 2023 Annual Report on Form 10-K as filed with the SEC on February 27, 2024.

The accompanying financial information reflects all adjustments which are, in the opinion of the Company’s management, of a normal recurring nature and necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the interim periods. Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”).

Reverse Stock Split

On June 12, 2023, the Company filed a certificate of amendment to its Third Restated Certificate of Incorporation (as amended from time to time, the “Certificate of Incorporation”) with the Secretary of State of the State of Delaware to effect a 1-for-15 reverse stock split (the “Reverse Stock Split”). The Company’s Class A common stock began trading on a split-adjusted basis at market open on June 13, 2023 under the existing symbol “OPAD”.

All share and per share amounts in the accompanying condensed consolidated financial statements have been retroactively adjusted to reflect the Reverse Stock Split for all periods presented.

Use of Estimates

The preparation of the Company’s condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements. Significant estimates include those related to the net realizable value of real estate inventory, among others. Actual results could differ from those estimates.

Principles of Consolidation

The Company’s condensed consolidated financial statements include the assets, liabilities, revenues and expenses of the Company, its wholly-owned operating subsidiaries and variable interest entities where the Company is the primary beneficiary. All intercompany accounts and transactions have been eliminated in consolidation.

Real Estate Inventory

Real estate inventory consists of acquired homes and is stated at the lower of cost or net realizable value, with cost and net realizable value determined by the specific identification of each home. Costs include initial purchase costs and renovation costs, as well as holding costs and interest incurred during the renovation period, prior to the listing date. Selling costs, including commissions and holding costs incurred after the listing date, are expensed as incurred and included in sales, marketing and operating expenses.

The Company reviews real estate inventory for valuation adjustments on a quarterly basis, or more frequently if events or changes in circumstances indicate that the carrying value of real estate inventory may not be recoverable. The Company

 

Offerpad Solutions Inc. | First Quarter 2024 Form 10-Q | 8


OFFERPAD SOLUTIONS INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

evaluates real estate inventory for indicators that net realizable value is lower than cost at the individual home level. The Company generally considers multiple factors in determining net realizable value for each home, including recent comparable home sale transactions in the specific area where the home is located, the residential real estate market conditions in both the local market in which the home is located and in the U.S. in general, the impact of national, regional or local economic conditions and expected selling costs. When evidence exists that the net realizable value of real estate inventory is lower than its cost, the difference is recognized as a real estate inventory valuation adjustment in cost of revenue and the related real estate inventory is adjusted to its net realizable value.

For individual homes or portfolios of homes under contract to sell as of the real estate inventory valuation assessment date, if the carrying value exceeds the contract price less expected selling costs, the carrying value of these homes are adjusted to the contract price less expected selling costs. For all other homes, if the carrying value exceeds the expected sale price less expected selling costs, the carrying value of these homes are adjusted to the expected sale price less expected selling costs. Changes in the Company’s pricing assumptions may lead to a change in the outcome of the real estate inventory valuation analysis, and actual results may differ from the Company’s assumptions.

The Company recorded real estate inventory valuation adjustments of $0.6 million and $7.3 million during the three months ended March 31, 2024 and 2023, respectively. Refer to Note 2. Real Estate Inventory, for further details.

Recent Accounting Standards

Income Tax Disclosures

In December 2023, the FASB issued a new standard which is intended to improve an entity’s income tax disclosures, primarily through disaggregated information about an entity’s effective income tax rate reconciliation and additional disclosures about income taxes paid. The new standard is effective for annual periods beginning after December 15, 2024. Accordingly, the new standard is effective for the Company on January 1, 2025 on a prospective basis. The Company is currently evaluating the impact that the standard will have on its condensed consolidated financial statements.

Segment Reporting

In November 2023, the FASB issued a new standard which is intended to improve disclosures about an entity’s reportable segments, primarily through enhanced disclosures about significant segment expenses. The new standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. Accordingly, the new standard is effective for the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, and subsequent interim periods, using a retrospective approach. The Company is currently evaluating the impact that the standard will have on its condensed consolidated financial statements.

Note 2. Real Estate Inventory

The components of real estate inventory, net of applicable lower of cost or net realizable value adjustments, consist of the following as of the respective period ends:

 

 

March 31,

 

 

December 31,

 

($ in thousands)

 

2024

 

 

2023

 

Homes preparing for and under renovation

 

$

67,849

 

 

$

53,116

 

Homes listed for sale

 

 

107,164

 

 

 

148,648

 

Homes under contract to sell

 

 

91,094

 

 

 

74,736

 

Real estate inventory

 

$

266,107

 

 

$

276,500

 

 

Note 3. Derivative Financial Instruments

During 2023, the Company entered into derivative arrangements pursuant to which the Company acquired options on U.S. Treasury futures. These options provided the Company with the right, but not the obligation, to purchase U.S. Treasury futures at a predetermined notional amount and stated term in the future.

During the three months ended March 31, 2023, the Company purchased $1.2 million of derivative instruments and recorded a $0.6 million change in the fair value of the derivative instruments in Other income, net in the condensed consolidated statements of operations.

The Company sold all of its outstanding derivative arrangements during October 2023 and no derivative arrangements remain outstanding.

 

Offerpad Solutions Inc. | First Quarter 2024 Form 10-Q | 9


OFFERPAD SOLUTIONS INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 4. Property and Equipment

Property and equipment consist of the following as of the respective period ends:

 

 

March 31,

 

 

December 31,

 

($ in thousands)

 

2024

 

 

2023

 

Rooftop solar panel systems

 

$

5,038

 

 

$

5,075

 

Leasehold improvements

 

 

1,130

 

 

 

1,130

 

Office equipment and furniture

 

 

837

 

 

 

837

 

Software systems

 

 

386

 

 

 

386

 

Computers and equipment

 

 

265

 

 

 

265

 

Construction in progress

 

 

385

 

 

 

32

 

Property and equipment, gross

 

 

8,041

 

 

 

7,725

 

Less: accumulated depreciation

 

 

(3,362

)

 

 

(3,208

)

Property and equipment, net

 

$

4,679

 

 

$

4,517

 

Depreciation expense was $0.2 million during each of the three months ended March 31, 2024 and 2023, respectively.

Note 5. Leases

The Company’s operating lease arrangements consist of its existing corporate headquarters in Chandler, Arizona, its future corporate headquarters in Tempe, Arizona, and field office facilities in most of the metropolitan markets in which the Company operates in the United States. These leases typically have original lease terms of 1 year to 10 years, and some leases contain multiyear renewal options. The Company does not have any finance lease arrangements.

The Company’s operating lease costs are included in operating expenses in the accompanying condensed consolidated statements of operations. During the three months ended March 31, 2024 and 2023, operating lease costs were $0.9 million and $0.6 million, respectively. Variable and short-term lease costs were less than $0.1 million during each of the three months ended March 31, 2024 and 2023, respectively.

Cash payments for amounts included in the measurement of operating lease liabilities were $0.3 million and $0.6 million, during the three months ended March 31, 2024 and 2023, respectively. During the three months ended March 31, 2024, right-of-use assets obtained in exchange for new or acquired operating lease liabilities were $7.9 million. There were no right-of-use assets obtained in exchange for new or acquired operating lease liabilities during the three months ended March 31, 2023.

As of March 31, 2024 and December 31, 2023, the Company’s operating leases had a weighted-average remaining lease term of 8.7 years and 1.8 years, respectively, and a weighted-average discount rate of 7.0% and 4.3%, respectively.

The Company’s operating lease liability maturities as of March 31, 2024 are as follows:

($ in thousands)

 

 

 

Remainder of 2024

 

$

1,760

 

2025

 

 

2,898

 

2026

 

 

2,089

 

2027

 

 

1,949

 

2028

 

 

1,922

 

2029

 

 

1,974

 

Thereafter

 

 

11,862

 

Total future lease payments

 

 

24,454

 

Less: Imputed interest

 

 

(7,388

)

Less: Tenant incentive receivable

 

 

(5,532

)

Total lease liabilities

 

$

11,534

 

 

 

Offerpad Solutions Inc. | First Quarter 2024 Form 10-Q | 10


OFFERPAD SOLUTIONS INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The Company’s operating lease right-of-use assets and operating lease liabilities, and the associated financial statement line items, are as follows as of the respective period ends:

 

 

 

 

March 31,

 

 

December 31,

 

($ in thousands)

 

Financial Statement Line Items

 

2024

 

 

2023

 

Right-of-use assets

 

Other non-current assets

 

$

10,538

 

 

$

3,338

 

Lease liabilities:

 

 

 

 

 

 

 

 

Current liabilities

 

Accrued and other current liabilities

 

 

2,185

 

 

 

2,271

 

Non-current liabilities

 

Other long-term liabilities

 

 

9,349

 

 

 

1,418

 

Total lease liabilities

 

 

 

$

11,534

 

 

$

3,689

 

 

Note 6. Accrued and Other Liabilities

Accrued and other current liabilities consist of the following as of the respective period ends:

 

 

March 31,

 

 

December 31,

 

($ in thousands)

 

2024

 

 

2023

 

Home renovation

 

$

4,004

 

 

$

3,534

 

Operating lease liabilities

 

 

2,185

 

 

 

2,271

 

Payroll and other employee related expenses

 

 

2,048

 

 

 

3,200

 

Interest

 

 

1,659

 

 

 

1,989

 

Marketing

 

 

1,018

 

 

 

999

 

Legal and professional obligations

 

 

604

 

 

 

392

 

Other

 

 

1,648

 

 

 

1,474

 

Accrued and other current liabilities

 

$

13,166

 

 

$

13,859

 

 

The Company incurred advertising expenses of $4.4 million and $8.0 million during the three months ended March 31, 2024 and 2023, respectively.

Other long-term liabilities consists of the non-current portion of our operating lease liabilities as of March 31, 2024 and December 31, 2023.

Note 7. Credit Facilities and Other Debt

The carrying value of the Company’s credit facilities and other debt consists of the following as of the respective period ends:

 

March 31,

 

 

December 31,

 

($ in thousands)

2024

 

 

2023

 

Credit facilities and other debt, net

 

 

 

 

 

Senior secured credit facilities with financial institutions

$

211,722

 

 

$

216,654

 

Senior secured credit facility with a related party

 

6,039

 

 

 

6,289

 

Mezzanine secured credit facilities with financial institutions

 

19,769

 

 

 

12,704

 

Mezzanine secured credit facilities with a related party

 

18,483

 

 

 

23,803

 

Debt issuance costs

 

(1,408

)

 

 

(2,226

)

Total credit facilities and other debt, net

 

254,605

 

 

 

257,224

 

Current portion - credit facilities and other debt, net

 

 

 

 

 

Total credit facilities and other debt, net

 

230,083

 

 

 

227,132

 

Total credit facilities and other debt - related party

 

24,522

 

 

 

30,092

 

Total credit facilities and other debt, net

$

254,605

 

 

$

257,224

 

The Company utilizes inventory financing facilities consisting of senior secured credit facilities, mezzanine secured credit facilities and other senior secured borrowing arrangements to provide financing for the Company’s real estate inventory purchases and renovation. Borrowings under the Company’s credit facilities and other debt are classified as current liabilities

 

Offerpad Solutions Inc. | First Quarter 2024 Form 10-Q | 11


OFFERPAD SOLUTIONS INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

on the accompanying condensed consolidated balance sheets as amounts drawn to purchase and renovate homes are required to be repaid as the related real estate inventory is sold, which is expected to be within 12 months.

As of March 31, 2024, the Company had a total borrowing capacity of $1,052.0 million under its senior secured credit facilities and mezzanine secured credit facilities, of which $562.2 million was committed. Any borrowings above the committed amounts are subject to the applicable lender’s discretion.

Under the Company’s senior secured credit facilities and mezzanine secured credit facilities, amounts can be borrowed, repaid and borrowed again during the revolving period. The borrowing capacity is generally available until the end of the applicable revolving period as reflected in the tables below. Outstanding amounts drawn under each senior secured credit facility and mezzanine secured credit facility are required to be repaid on the facility maturity date or earlier if accelerated due to an event of default or other mandatory repayment event.

The Company’s senior secured credit facilities and mezzanine secured credit facilities have aggregated borrowing bases, which increase or decrease based on the cost and value of the properties financed under a given facility and the time that those properties are in the Company’s possession. When the Company resells a home, the proceeds are used to reduce the corresponding outstanding balance under the related senior and mezzanine secured revolving credit facilities. The borrowing base for a given facility may be reduced as properties age beyond certain thresholds or the performance of the properties financed under that facility declines, and any borrowing base deficiencies may be satisfied through contributions of additional properties or partial repayment of the facility.

Senior Secured Credit Facilities

The following summarizes certain details related to the Company’s senior secured credit facilities (in thousands, except interest rates):

 

Borrowing Capacity

 

 

Outstanding

 

 

Weighted-
Average
Interest

 

 

End of
Revolving /
Withdrawal

 

Final
Maturity

As of March 31, 2024

Committed

 

 

Uncommitted

 

 

Total

 

 

Amount

 

 

Rate

 

 

Period

 

Date

Senior financial institution 1

$

200,000

 

 

$

200,000

 

 

$

400,000

 

 

$

99,528

 

 

 

8.13

%

 

June 2025

 

June 2025

Senior financial institution 2

 

100,000

 

 

 

100,000

 

 

 

200,000

 

 

 

45,743

 

 

 

8.07

%

 

January 2025

 

July 2025

Senior financial institution 3

 

100,000

 

 

 

50,000

 

 

 

150,000

 

 

 

44,402

 

 

 

8.57

%

 

January 2025

 

April 2025

Related party

 

30,000

 

 

 

20,000

 

 

 

50,000

 

 

 

6,039

 

 

 

10.34

%

 

March 2025

 

September 2025

Senior financial institution 4

 

30,000

 

 

 

45,000

 

 

 

75,000

 

 

 

22,049

 

 

 

9.83

%

 

August 2024

 

February 2025

Senior secured credit facilities

$

460,000

 

 

$

415,000

 

 

$

875,000

 

 

$

217,761

 

 

 

 

 

 

 

 

 

 

Borrowing Capacity

 

 

Outstanding

 

 

Weighted-
Average
Interest

 

 

 

 

 

As of December 31, 2023

Committed

 

 

Uncommitted

 

 

Total

 

 

Amount

 

 

Rate

 

 

 

 

 

Senior financial institution 1

$

200,000

 

 

$

200,000

 

 

$

400,000

 

 

$

135,676

 

 

 

7.91

%

 

 

 

 

Senior financial institution 2

 

100,000

 

 

 

100,000

 

 

 

200,000

 

 

 

55,541

 

 

 

7.61

%

 

 

 

 

Senior financial institution 3

 

100,000

 

 

 

50,000

 

 

 

150,000

 

 

 

6,453

 

 

 

7.11

%

 

 

 

 

Related party

 

30,000

 

 

 

20,000

 

 

 

50,000

 

 

 

6,289

 

 

 

10.05

%

 

 

 

 

Senior financial institution 4

 

30,000

 

 

 

45,000

 

 

 

75,000

 

 

 

18,984

 

 

 

8.42

%

 

 

 

 

Senior secured credit facilities

$

460,000

 

 

$

415,000

 

 

$

875,000

 

 

$

222,943

 

 

 

 

 

 

 

 

As of March 31, 2024, the Company had five senior secured credit facilities, four with separate financial institutions and one with a related party, which holds more than 5% of our Class A common stock. Borrowings under the senior secured credit facilities accrue interest at a rate based on a Secured Overnight Financing Rate (“SOFR”) reference rate, plus a margin which varies by facility. Each of the Company’s senior secured credit facilities also have interest rate floors. The Company may also pay fees on its senior secured credit facilities, including a commitment fee and fees on certain unused portions of the committed borrowing capacity under the respective credit agreements.

Borrowings under the Company’s senior secured credit facilities are collateralized by the real estate inventory financed by the senior secured credit facility. The lenders have legal recourse only to the assets securing the debt and do not have general recourse against the Company with limited exceptions. The Company has, however, provided limited non-recourse carve-out guarantees under its senior and mezzanine secured credit facilities for certain of the SPEs’ obligations. Each senior secured credit facility contains eligibility requirements that govern whether a property can be financed.

 

Offerpad Solutions Inc. | First Quarter 2024 Form 10-Q | 12


OFFERPAD SOLUTIONS INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Mezzanine Secured Credit Facilities

The following summarizes certain details related to the Company’s mezzanine secured credit facilities (in thousands, except interest rates):

 

Borrowing Capacity

 

 

Outstanding

 

 

Weighted-
Average
Interest

 

 

End of
Revolving /
Withdrawal

 

Final
Maturity

As of March 31, 2024

Committed

 

 

Uncommitted

 

 

Total

 

 

Amount

 

 

Rate

 

 

Period

 

Date

Related party facility 1

$

45,000

 

 

$

25,000

 

 

$

70,000

 

 

$

16,994

 

 

 

13.84

%

 

June 2025

 

December 2025

Mezzanine financial institution 1

 

22,500

 

 

 

22,500

 

 

 

45,000

 

 

 

9,408

 

 

 

13.92

%

 

January 2025

 

July 2025

Mezzanine financial institution 2

 

26,667

 

 

 

13,333

 

 

 

40,000

 

 

 

10,361

 

 

 

12.57

%

 

January 2025

 

April 2025

Related party facility 2

 

8,000

 

 

 

14,000

 

 

 

22,000

 

 

 

1,489

 

 

 

13.84

%

 

March 2025

 

September 2025

Mezzanine secured credit facilities

$

102,167

 

 

$

74,833

 

 

$

177,000

 

 

$

38,252

 

 

 

 

 

 

 

 

 

 

Borrowing Capacity

 

 

Outstanding

 

 

Weighted-
Average
Interest

 

 

 

 

 

As of December 31, 2023

Committed

 

 

Uncommitted

 

 

Total

 

 

Amount

 

 

Rate

 

 

 

 

 

Related party facility 1

$

45,000

 

 

$

25,000

 

 

$

70,000

 

 

$

22,250

 

 

 

11.56

%

 

 

 

 

Mezzanine financial institution 1

 

22,500

 

 

 

22,500

 

 

 

45,000

 

 

 

11,198

 

 

 

12.79

%

 

 

 

 

Mezzanine financial institution 2

 

26,667

 

 

 

13,333

 

 

 

40,000

 

 

 

1,506

 

 

 

9.55

%

 

 

 

 

Related party facility 2

 

8,000

 

 

 

14,000

 

 

 

22,000

 

 

 

1,553

 

 

 

13.05

%

 

 

 

 

Mezzanine secured credit facilities

$

102,167

 

 

$

74,833

 

 

$

177,000

 

 

$

36,507

 

 

 

 

 

 

 

 

As of March 31, 2024, the Company had four mezzanine secured credit facilities, two with separate financial institutions and two with a related party, which holds more than 5% of our Class A common stock. Borrowings under the Company’s mezzanine secured credit facilities accrue interest at a rate based on a SOFR reference rate, plus a margin which varies by facility. Each of the Company’s mezzanine secured credit facilities also have interest rate floors. The Company may also pay fees on its mezzanine secured credit facilities, including a commitment fee and fees on certain unused portions of the committed borrowing capacity under the respective credit agreements.

Borrowings under the Company’s mezzanine secured credit facilities are collateralized by a second lien on the real estate inventory financed by the relevant credit facility. The lenders have legal recourse only to the assets securing the debt, and do not have general recourse to Offerpad with limited exceptions.

The Company’s mezzanine secured credit facilities are structurally and contractually subordinated to the related senior secured credit facilities.

Maturities

Certain of the Company’s secured credit facilities mature within the next twelve months following the date these condensed consolidated financial statements are issued. The Company expects to enter into new financing arrangements or amend existing arrangements to meet its obligations as they come due, which the Company believes is probable based on its history of prior credit facility renewals. The Company believes cash on hand, together with proceeds from the resale of homes and cash from future borrowings available under each of the Company’s existing credit facilities or the entry into new financing arrangements, will be sufficient to meet its obligations as they become due in the ordinary course of business for at least 12 months following the date these condensed consolidated financial statements are issued.

Covenants for Senior Secured Credit Facilities and Mezzanine Secured Credit Facilities

The Company’s secured credit facilities include customary representations and warranties, covenants and events of default. Financed properties are subject to customary eligibility criteria and concentration limits. The terms of these facilities and related financing documents require the Company to comply with a number of customary financial and other covenants, such as maintaining certain levels of liquidity, tangible net worth or leverage (ratio of debt to tangible net worth).

As of March 31, 2024, the Company was in compliance with all covenants and no event of default had occurred.

 

Offerpad Solutions Inc. | First Quarter 2024 Form 10-Q | 13


OFFERPAD SOLUTIONS INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 8. Warrant Liabilities

As of March 31, 2024, the Company had 16.1 million public warrants outstanding and 5.7 million private placement warrants outstanding, with every 15 warrants being exercisable to purchase one share of Class A common stock at an exercise price of $172.50 per share.

Public Warrants

The public warrants became exercisable on October 23, 2021. A holder may exercise its warrants only for a whole number of shares of Class A common stock. The public warrants will expire September 1, 2026, or earlier upon redemption or liquidation. Pursuant to the terms of the warrant agreements, the Company may call the public warrants for redemption for cash or redeem the outstanding warrants for shares of Class A common stock under certain scenarios. The public warrants are traded on an over-the-counter market.

Private Placement Warrants

The private placement warrants are not redeemable by the Company so long as they are held by the Supernova Sponsor or its permitted transferees, except in certain limited circumstances. The Supernova Sponsor, or its permitted transferees, has the option to exercise the private placement warrants on a cashless basis and the Supernova Sponsor and its permitted transferees has certain registration rights related to the private placement warrants (including the shares of Class A common stock issuable upon exercise of the private placement warrants). Except as described in this section, the private placement warrants have terms and provisions that are identical to those of the public warrants. If the private placement warrants are held by holders other than the Supernova Sponsor or its permitted transferees, the private placement warrants will be redeemable by the Company and exercisable by the holders on the same basis as the public warrants.

Note 9. Fair Value Measurements

The fair values of cash and cash equivalents, restricted cash, accounts receivable, accounts payable, and certain prepaid and other current assets and accrued expenses approximate carrying values because of their short-term nature. The Company’s credit facilities are carried at amortized cost and the carrying value approximates fair value because of their short-term nature.

The Company’s liabilities that are measured at fair value on a recurring basis consist of the following (in thousands):

As of March 31, 2024

 

Quoted Prices in
Active Markets for
Identical Liabilities
(Level 1)

 

 

Significant Other
Observable Inputs
(Level 2)

 

 

Significant
Unobservable Inputs
(Level 3)

 

Public warrant liabilities

 

$

52

 

 

$

 

 

$

 

Private placement warrant liabilities

 

$

 

 

$

 

 

$

75

 

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