Opendoor Technologies Inc · NASDAQ:OPEN
Opendoor Technologies — Social Capital Hedosophia Holdings Corp. II — SPAC Merger (November 2020)
63 slides from Opendoor Technologies's SPAC merger presentation, Nov 16, 2020
Slide 1: Opendoor
Opendoor
Slide 2: Disclaimer
Disclaimer 2 Confidentiality and Disclosures This presentation has been prepared for use by Social Capital Hedosophia Holdings Corp . II (“Social Capital”) and Opendoor Labs Inc . (“Opendoor”) in connection with their proposed business combination . This presentation is for information purposes only
Slide 3: Agenda
3 Agenda Business overview Eric Wu, Co - Founder and CEO Product overview Tom Willerer, Chief Product Officer Pricing and technology platform Ian Wong, Co - Founder and Chief Technology Officer Operations and fulfillment Megan Meyer Toolson, Head of Operations Growth Eric Wu, Co - Founder and CEO Fi
Slide 4: Incredible upgrade opportunity
“Incredible upgrade opportunity” My journey started at 2004 Mitchell Street
Slide 5: Product, Engineering, Design & Marketing, Operations, Finance leaders
5 Product Engineering Design & Marketing Operations Finance Brian Tolkin Head of Seller Product Product, Uber Mark Kinsella Head of Engineering Director, Lyft Paul Smith Head of Design Director, Uber Nadia Aziz Head of Mortgages VP, Capital One Rajiv Krishnarao Head of Finance Director, Uber David S
Slide 6: Buy, sell & move at the tap of a button
Buy, sell & move 6 at the tap of a button Unlock homeownership for millions of Americans
Slide 7: We are the market innovator and leader
7 We are the market innovator and leader 2017 2019 Revenue ($B) $0.7 $1.8 $4.7 Key metrics Note: 2017 2019 Homes sold 3,127 7,470 18,799 21 $10B 80K Markets Homes sold Homeowners served Markets, homeowners served and homes sold metrics since Company inception; homeowners served defined as number of
Slide 8: Massive market
4% 50+ annual transactions 66% 0 - 15 annual transactions 31% 15 - 50 annual transactions Real estate Used autos Food $1.0T/yr $841B/yr 68% of Americans are homeowners 5 million homes sold annually Fragmented incumbents $1.6T/yr 8 Massive market Data sourced from public company filings, U.S. Bureau
Slide 9: We've rebuilt the entire real estate service stack
Foundation of software and data science Pricing Real - time models to predict the value of a home Operations Inspections, repairs, renovations, and maintenance of homes Product Simple, certain and fast experience for customers Customer Experience Centralized sales and support teams to manage the tra
Slide 10: Product
Product 10 Tom Willerer Chief Product Officer
Slide 11: Today, 89% of buyers and sellers use an agent
Today, 89% of buyers and sellers use an agent, and this is their experience Agent use, 89%, per National Association of Realtors report List days, home visits and fall - through metrics based on analysis of Multiple Listing Service (MLS) and Company data Per transaction $ values indicative based on
Slide 12: Offering greater simplicity, certainty, speed and safety
Offering greater simplicity, certainty, speed and safety 12 Complex Slow Uncertain Human intensive Average of 6 counter parties to manage ~20% of transactions fall through Inflexible timelines to closing Average of 87 days to close on the market Averaging 12 visitors per listing with months of open
Slide 13: Online cash offer, flexible close date, digital closing
13 Online cash offer Flexible close date Digital closing Receive an offer and sell on your timeline
Slide 14: New experience to search, visit and buy homes
New experience to search, visit and buy thousands of homes 14 Self - tour homes Financing in - app Digital offer process
Slide 15: Home sellers are choosing Opendoor
20% Real sellers High intent customers 80% Browsing for a quote 15 34% 2019 real seller conversion High conversion 25% 23% 24% 26% 30% 31% 35% 38% 40% 46% 44% >10% 9.5% 8.5% 7.5% 6.5% <6.0% Even at 10% fees conversion is 23% And at 6% fees conversion is 44%+ Real seller conversion vs. fees Based on
Slide 16: Our customers want convenience and certainty
16 Our customers want convenience and certainty Note: Sellers looking to buy another home from September 2018 Opendoor closed seller survey; all other metrics from October 2020 Op end oor closed seller survey Convenience sellers Contingent buyers 62% of sellers cite convenience and certainty as prim
Slide 17: And are delighted by our experience
Rental Car Traditional… Category Leaders 17 Traditional… Mortgage Title Opendoor 70 Net Promoter Score NPS metrics based on Company data from last twelve months, public filings and 3rd - party research Note: And are delighted by our experience
Slide 18: Pricing and Technology Platforms
Pricing and Technology Platforms 18 Ian Wong Co - Founder, CTO
Slide 19: Pricing & data science objectives
19 Deliver competitive and accurate home valuations to sellers Set fees that anticipate dynamic market conditions Pricing & data science objectives
Slide 20: Accuracy through proprietary, structured, hyper-local data
Feature level home data 145 Unique features per inspection 175K On - site inspections 25M Home level data inputs 1B Home level adjustments 20 On - site inspections and home - level adjustment metrics reflect to - date company data as of August 2020; feature price adjustments are indicative Accuracy
Slide 21: Resale price prediction and offer automation
21 1Q16 1Q18 1Q20 41% 63% With step - function increases in automation Meaningful improvements in accuracy 2Q18 acquisition cohort 2Q19 acquisition cohort Predicted vs. actual resale price (absolute delta in %) Least mature More mature Most mature With leading edge pricing models and tooling Accurac
Slide 22: Highly scalable, predictive & accurate pricing engine
22 Highly scalable, predictive & accurate pricing engine Superior inventory health and risk profile Underwriting enhancements as cities mature City Contribution Margin over time (cumulative) % Listings > 150 days on market % Acquisition cohort sold 100% City maturation New market at launch New marke
Slide 23: Operations and Fulfillment
23 Operations and Fulfillment Megan Meyer Toolson Head of Operations
Slide 24: Low cost, repeatable and scalable transaction platform
Low cost, repeatable and scalable transaction platform 24 Centralization across the home journey Consolidate tasks online and leverage scale economies Software - enabled, streamlined processes Utilize software to enable accuracy, automation and remote workflows Scale economies to drive down costs Le
Slide 25: The journey of a home from offer to resale
25 The journey of a home from offer to resale Consumer facing Internal Resale contract Home resold Home listed Home acquired First offer sent Sales + support Assessment Flexible close Reno / Repair Potential buyer self - tours Offer negotiation Buyer inspection Buyer mortgage Flexible close Self - s
Slide 26: Cost improvements in home repairs
26 Cost improvements in home repairs due to superior operational processes and software Eliminating repair overruns 2018 1Q20 82% decrease Reducing pre - list days 2018 1Q20 50% decrease App to manage all home ops workflows Opendoor Scout Performance data on repair overruns and pre - list days based
Slide 27: We are 12x more efficient than a traditional agent
27 Centralization & automation Traditional agent Opendoor We are 12x more efficient than a traditional agent Transactions / person Opendoor productivity based on 2019 total closes and average operator headcount; traditional agent based on National Associat ion of Realtors report Net cost structure b
Slide 28: Growth
Growth 28 Eric Wu Co - founder, CEO
Slide 29: Our first 6 markets reached $2.7B run-rate revenue
Phoenix Dallas - Fort Worth Las Vegas Atlanta Raleigh - Durham Orlando $1.0B run - rate revenue 4.2% market share $206M run - rate revenue 1.9% market share $329M run - rate revenue 1.7% market share $664M run - rate revenue 4.6% market share $388M run - rate revenue 5.5% market share $166M run - ra
Slide 30: Today, we are in 21 markets
Charlotte San Antonio Sacramento Houston Tampa Portland Denver Nashville Jacksonville Austin Minneapolis - St.Paul Riverside Tucson Los Angeles Salt Lake City 30 $5.0B 1Q20 Run - rate revenue 2.0% Market share 21 Markets Today, we are in 21 markets and just scratching the surface Market share based
Slide 31: Our current playbook takes us to $50B in revenue
31 Our current playbook takes us to $50B in revenue $50B Run - rate revenue 4% Market share 100 Markets Portland Seattle Riverside Orange County Stockton Tacoma El Centro Hanford Reno Kennewick Salem Spokane Visalia Los Angeles Ventura Oakland Modesto Bakersfield Redding Sacramento San Diego Phoenix
Slide 32: With a U.S. market potential of $1.3T
32 With a U.S. market potential of $1.3T 5M Annual homes sold Annual homes sold and sales distribution per National Association of Realtors (NAR) Gross Merchandise Value = annual homes sold x $310k average sales price x 87%. Individual metrics per NAR 87% Homes in buy box of $100K to $750K $1.3T Tot
Slide 33: Track record of new market launches
33 Track record of new market launches Market share Market share by market maturity Month of operation 0.0% 0.3% 0.5% 0.8% 1.0% 1.3% 1.5% 1 2 3 4 5 6 7 8 9 10 11 12 Phoenix Next 5 Next 15 Infrastructure in place to launch efficiently Centralized customer operations Centralized teams to service selle
Slide 34: The Future
The Future 34 Eric Wu Co - founder, CEO
Slide 35: Early stages of the digital transformation in real estate
35 Category % Online Market leader Market capitalization Retail Transportation Used auto sales Real estate 14% 4% 1% < 1% ~$1.5T ~$80B ~$35B Online penetration metrics are based on public filings and third party research; online penetration for real estate based on ava ilable iBuyer information Mark
Slide 36: Customers are prioritizing safety
36 Customers are prioritizing safety Opendoor provides a digital, contact - less way to buy and sell a home Customers are demanding digital first experiences De - urbanization is occurring as buyers avoid dense areas Demand for housing in our markets is strengthening COVID - 19 has accelerated shift
Slide 37: Consumers demand digital experiences for services around the home
Home maintenance Title and Escrow Financing Upgrades Warranty Insurance Moving services 37 Consumers demand digital experiences for the services that revolve around the home
Slide 38: We will transform how people move
38 We’ve transformed how people sell a home Today Sold in a few taps The picture can't be displayed. As the market leader, we are just getting started Tomorrow We will transform how people move Digital one - stop shop to move
Slide 39: Financial Overview
Financial Overview 39 Carrie Wheeler CFO
Slide 40: Financial overview
40 Financial overview Unit economics Historical performance 2020 and 2021 review Projections Balance sheet review O1
Slide 41: We have proven, positive unit economics
41 We have proven, positive unit economics Contribution Margin 3.1% 1Q20 Margin Performance Phoenix Total Company All metrics presented are non - GAAP, see reconciliation in Appendix for total company. Phoenix market metrics use same methodolog y as total company equivalents $8K/home Contribution Ma
Slide 42: The vast majority of our markets are CM positive
Phoenix Contribution Margin per home by market (1Q20) 42 $8K / home TotalCo Contribution Margin $11K / home 4.0% All metrics presented are non - GAAP, see reconciliation in Appendix. Based on 1Q20 performance for 19 markets. Excludes ramping m arkets with fewer than 50 resale closes in 1Q20 The vast
Slide 43: Adjacent services roadmap
43 Adjacent services roadmap First proof point with title & escrow Quarter since launch 7,031 103 510 1,134 2,381 3,951 4,720 5,934 20% 40% 60% 80% 8,157 82.9% 75.9% 78.4% 75.8% 74.5% 57.8% 36.1% 21.6% 5.7% Title & escrow transactions (#) Attach rate (%) Attach rate based on total acquisition and re
Slide 44: Significant margin upside from additional services and cost optimization
Ancillary Gross Margin Ancillary Gross Margin Vehicle Gross Margin Vehicle Gross Margin Expect ~50 / 50 long - term unit margin composition, similar to other “trade - in” business models 44 1Q20 Contribution Margin Cost optimization Additional services Long - term target Contribution Margin $8K/home
Slide 45: Rapid growth at scale and improving profitability
45 Adjusted EBITDA Margin (8.0%) (7.1%) (4.6%) Homes sold 2017 2018 2019 3,127 7,470 18,799 2017 2018 2019 Revenue ($B) $0.7 $1.8 $4.7 Rapid growth at scale and improving profitability Note: Adjusted EBITDA Margin is a non - GAAP metric, see reconciliation in Appendix 1Q20 run rates do not reflect t
Slide 46: Updated expectations for 2020
46 Updated expectations for 2020 $ in millions YTD Sep - 19 YTD Sep - 20 3Q19 3Q20 Homes Sold 13,768 9,064 4,783 1,232 Total Revenue $3,485 $2,334 $1,211 $339 Adjusted Gross Profit % Margin $226 6.5% $173 7.4% $80 6.6% $33 9.8% Total Contribution Profit % Margin $74 2.1% $79 3.4% $29 2.4% $20 5.8% A
Slide 47: 2021 inventory and revenue trajectory
t 47 2021 Inventory and Revenue trajectory Revenue performance highly correlated with prior period - end inventory levels Inventory + Revenue performance indexed to 2019 All ensuing inventory and Revenue data points indexed to 4Q19 Inventory Note: 1H / 2H Revenue cadence Inventory dynamics in 2020 a
Slide 48: Well capitalized with scalable, efficient financing in place
2016 2018 2020 48 Well capitalized with scalable, efficient financing in place (1) As of September 30, 2020, $3.4bn in total borrowing capacity with $2.0bn in committed capacity. Debt facilities are restricte d use for the purchase of homes (2) Advance rate and senior debt cost are representative. A
Slide 49: Summary financials and projections 2017-2023
2017 2018 2019 2020P 2021P 2022P 2023P Homes Sold 3,127 7,470 18,799 9,750 13,458 24,030 37,689 % YoY Growth 113% 139% 152% (48%) 38% 79% 57% Total Revenue ($B) $0.7 $1.8 $4.7 $2.5 $3.5 $6.2 $9.8 % YoY Growth 109% 159% 158% (47%) 38% 79% 58% Adjusted Gross Profit ($M) $66 $146 $297 $190 $269 $521 $8
Slide 50: Breakdown of expected growth drivers
50 Breakdown of expected growth drivers Revenue Contribution Profit 2021 Revenue Existing markets New markets 2023 Revenue $3.5B $9.8B 2021 Contribution Profit 2023 Contribution Profit All metrics presented are non - GAAP, see reconciliation in Appendix Note: $142M $539M Existing markets New markets
Slide 51: Long-term margin targets
All metrics presented are non - GAAP, see reconciliation in Appendix (1) Assumes home sale price of $250K 51 Metric 2018 2019 YTD 2020 Long - term target Key drivers Total Contribution Margin 3.5% 1.9% 3.4% 7 - 9% ($20K/home) • Maturation of existing, launched markets • Continuing optimization of co
Slide 52: Significant upside ahead
Significant upside ahead Revenue growth and margin improvement expected via market penetration and adjacent services Investment highlights 52 Massive, fragmented market U.S. real estate industry is ripe for disruption Superior consumer experience Digital experience transforming a highly inefficient
Slide 53: Q&A
Q&A 53 Carrie Wheeler CFO Eric Wu Co - founder, CEO Rajiv Krishnarao Head of Finance Dod Fraser Head of Capital Markets
Slide 54: Appendices
54 Appendices Additional financial information Inventory profile and management 1. 2. EH8
Slide 55: Non-GAAP Reference
55 Non - GAAP Reference Key Metric Key Component GAAP P&L Reference Description Total Revenue Transaction Revenue (Net Resale Price x Homes Sold) + Ancillary Product Revenue Less: Net Purchase Price Cost of Revenue Headline Purchase Price net of Service Charge Less: Net Repairs Cost of Revenue Reno
Slide 56: Gross profit and contribution profit reconciliation
56 2017 2018 2019 9/30/2019 9/30/2020 1Q20 2Q20 3Q20 GAAP Gross Profit ($M) $66 $133 $301 $227 $181 $91 $55 $36 Adjustments: Net Impairment $0 $13 ($5) ($1) ($10) ($2) ($5) ($3) Restructuring in Cost of Revenue $0 $0 $0 $0 $2 $0 $2 $0 Adjusted Gross Profit $66 $146 $297 $226 $173 $89 $51 $33 Adjuste
Slide 57: Net income to Adjusted EBITDA reconciliation
57 2017 2018 2019 9/30/2019 9/30/2020 1Q20 2Q20 3Q20 GAAP Net Income ($M) ($85) ($240) ($339) ($247) ($199) ($62) ($56) ($81) Adjustments: Stock Based Compensation $4 $15 $13 $10 $9 $3 $4 $3 Derivative and Warrant FV Adjustment $0 $18 ($6) ($7) $25 $1 $0 $24 Intangibles Amort. Expense $0 $1 $3 $2 $3
Slide 58: Appendices
58 Appendices Additional financial information Inventory profile and management 1. 2. EH9
Slide 59: Inventory profile and management
Inventory profile and management Shorter duration real estate assets Residential real estate markets move slowly Pricing systems built to react quickly to changing market conditions EH10
Slide 60: Shorter duration real estate assets
Shorter duration real estate assets 9 mo 12 mo 24 mo 60 mo 84 mo 3.00 Opendoor "Fix & Flip" Single family… Non - performing loans Homebuilder Performing… 3 - 4 mo of inventory under contract to be resold at any given time, reducing risk profile Average hold time for selected residential real estate
Slide 61: COVID-19: Systems built to react quickly to changing market conditions
61 COVID - 19: Systems built to react quickly to changing market conditions 15,192 First offers sent (#) 7,362 Paused offers Feb - 20 Jul - 20 $1,019 $172 Inventory ($M) De - risked balance sheet Adjusted Gross Margin (%) 7.1% 6.9% 5.6% Adjusted Gross Margin is a non - GAAP metric, see reconciliatio
Slide 62: Residential real estate prices move gradually
62 Residential real estate prices move gradually Peak - to - trough, home prices took 5+ years to decline Annualized transaction volumes remained above 3.7M (1) Average QoQ price change - 3% +3% 1Q75 2Q20 Only one quarter where prices dropped more than 3% since 1975 0% Home price movements from Fede
Slide 63: Opendoor
Opendoor
Social Capital Hedosophia Holdings Corp. II — SPAC Merger (November 2020) on 6ix