OPENDOOR TECHNOLOGIES INC. 
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis provides information that our management believes is relevant to an assessment and understanding of our condensed consolidated results of operations and financial condition. The discussion should be read together with the historical condensed consolidated financial statements and related notes that appear in this Quarterly Report on Form 10-Q.
This discussion may contain forward-looking statements based upon current
expectations that involve risks and uncertainties. Our actual results may differ
materially from those anticipated in these forward-looking statements as a
result of various factors, including those set forth under "Forward-Looking
Statements," "Risk Factors" or in other parts of this Quarterly Report on
Form 10-Q, and in "Part I - Item 1A. Risk Factors" in the Company's Annual
Report on Form 10-K for the year ended
Overview
Opendoor's mission is to empower everyone with the freedom to move and make it possible to buy, sell and move at the tap of a button. We are transforming what has historically been a complex, uncertain, time-consuming and mostly offline process into a simple, online experience. Since our inception in 2014, we have built scalable pricing capabilities, technology-enabled centralized operations, and a suite of digital-first consumer products. These investments have enabled us to help customers buy or sell homes in over 188,000 transactions and expand our footprint to 51 markets across the country. Most importantly, we have grown rapidly while delighting our customers with an experience that brings simplicity, certainty and speed to the home selling and buying process. Financial Highlights Three Months Ended Six Months Ended June 30, June 30, (in millions, except percentages, homes sold, number of markets, and homes in inventory) 2022 2021 Change 2022 2021 Change Revenue$ 4,198 $ 1,186 $ 3,012 $ 9,349 $ 1,933 $ 7,416 Homes sold 10,482 3,481 7,001 23,151 5,943 17,208 Gross profit$ 486 $ 159 $ 327 $ 1,021 $ 256 $ 765 Gross margin 11.6 % 13.4 % 10.9 % 13.2 % Net loss$ (54) $ (144)
$ 122 $ 3 $ 119 $ 221 $ (18) $ 239 Contribution Profit$ 422 $ 128 $ 294 $ 754 $ 204 $ 550 Contribution Margin 10.1 % 10.8 % 8.1 % 10.5 % Adjusted EBITDA$ 218 $ 25 $ 193 $ 394 $ 23 $ 371 Adjusted EBITDA Margin 5.2 % 2.2 % 4.2 % 1.2 % Number of markets (at period end) 51 39 12 51 39 12 Inventory (at period end)$ 6,628 $ 2,724
17,013 7,971 9,042 17,013 7,971 9,042
Current Housing Environment
The second quarter marked a change in the overall macroeconomic environment, with rising inflation expectations and an aggressive rate hike response from theFederal Reserve . Thirty-year fixed mortgage rates went from an average of 3.8% during the first quarter of 2022 to an average of 5.3% in the second quarter of 2022, which is the largest quarter-on-quarter increase since 1980. In response to these macroeconomic shifts, we saw a significant pullback in home buyer demand which translated through to a slowdown in both home price appreciation ("HPA") and transaction velocity from the close to record highs. While we had anticipated a slowdown in the housing market from peak levels, the rate of deceleration in home prices was steeper than anticipated. We typically observe HPA to be zero or slightly negative in the back half of any given year due to housing seasonality. The speed with which HPA declined from peak levels earlier this year was faster than our expectation and 30
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Management's Discussion and Analysis of Financial Condition and Results of
Operations(Tabular amounts in millions, except share and per share data and ratios, or as
noted)
sharper than typical seasonal home price declines. With respect to home
transactions, we observed that the absolute levels of home transactions were
commensurate with the historically healthy levels of 2018 and 2019, but that the
clearance rate of homes declined swiftly.
While our response to these macroeconomic changes requires a highly dynamic and
rigorous approach to managing risk and overall inventory health, we believe we
are uniquely positioned to navigate this volatility given our responsive pricing
strategies, flexible operating model, low cost structure and strong balance
sheet. We discuss the anticipated effects on our business throughout this
section, including under "Factors Affecting Our Business Performance."
Business Impact of COVID-19
In response to the COVID-19 pandemic and the consequent health risks, we substantially paused purchasing additional homes inMarch 2020 to safeguard the health and safety of our customers and employees and sold down most of our homes in inventory. After retooling certain operational processes to enable "contactless" transactions, we resumed making offers to purchase homes in select markets inMay 2020 and resumed operations across all of our markets by the end ofAugust 2020 . We surpassed pre-COVID-19 inventory levels in the second quarter of 2021. While we believe we have adapted our operations to function effectively during the ongoing COVID-19 pandemic, our business remains sensitive to potential future disruptions of the real estate market caused by COVID-19 and its variants.
Factors Affecting our Business Performance
Market Penetration in Existing Markets
Residential real estate is one of the largest consumer markets, with approximately$2.3 trillion of home value transacted annually. Given the fact that we operate in a highly fragmented industry and offer a differentiated value proposition to the incumbent agent-led transaction, we believe there is significant opportunity to expand our share in our existing cities. By providing a consistent, high-quality and differentiated experience to our customers, we hope to continue to drive positive word-of-mouth awareness and trust in our platform. We believe this creates a virtuous cycle, whereby more home sellers will request an offer fromOpendoor , allowing us to deepen our market penetration.
Expansion into New Markets
We have expanded into 51 markets as of
June 30, March 31, Year Ended December 31,
(in whole numbers) 2022 2022 2021 2020 2019
Number of markets (at period end) 51 45 44 21 21
We launched seven new markets in the first half of 2022, adding to the 23 markets launched in 2021.
We have honed our market launch playbook by centralizing many of our core
pricing, operations, and customer service functions, enabling us to launch new
markets more efficiently and quickly in the future. For example, we are
generally able to launch a market with only a small field team focused on home
renovation oversight, with all other key functions managed centrally.
We view the first year of a market launch as an investment period during which
we refine our pricing models, renovation strategies and cost structure.
Historically, we have seen underwriting performance for purchase cohorts in new
markets improve approximately one year after initial launch. While new markets
do not contribute significantly to revenue during their first year of operation,
they provide a foundation for long-term growth once local operational and
pricing capabilities have been refined.
We have historically made substantial investments to support our market
launches, which tends to impact both Contribution Margin and Adjusted EBITDA as
these new markets mature. We expect such investments to continue as we launch
additional markets.
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Management's Discussion and Analysis of Financial Condition and Results of
Operations(Tabular amounts in millions, except share and per share data and ratios, or as
noted)
Adjacent Services
We believe home sellers and buyers value simplicity and convenience. To that
end, we are building an online, integrated suite of home services, which
currently include title insurance and escrow services, Buy with Opendoor , and
Opendoor Complete. We also offer mortgage services. Historically, we primarily
delivered these services through Opendoor Home Loans, which operated as a
correspondent lender. We are focusing our mortgage efforts on the seamless
integration of financing with the rest of the Opendoor ecosystem and as such are
now more focused on brokerage activities via both Opendoor Home Loans and OD
Homes Brokerage (formerly RedDoor HQ Inc. ("RedDoor")). We work closely with our
strategic partner Lower.com as well as other mortgage lenders to offer our
customers a broader suite of mortgage products and services. Our success with
title insurance and escrow services helps validate our view that customers
prefer an online, integrated experience. We expect that these adjacent services
will also be accretive to our Contribution Margin.
We will continue to evaluate new ways to improve our end-to-end solution and expect to invest in additional adjacent products and services over time.
Unit Economics
We view Contribution Margin and Contribution Margin after Interest as key measures of unit economic performance. Our long-term financial performance depends, in part, on continuing to expand unit margins through the following initiatives:
•Successful incremental attach of services that supplement the core transaction margin profile via our existing services as well as new ones.
•Pricing engine optimization and enhancements, as we expand our reach in existing markets and enter new markets.
•Lowering platform costs through process refinement, greater automation and self-service, and more efficient forms of financing.
Inventory Management
Effectively managing our overall inventory position is critical to our financial
performance. Since our inception, we have prioritized investment in our pricing
capabilities across our home acquisition processes and our forecasting and
resale systems, and will continue to do so. As part of our overall risk
management framework, we consider both individual market and aggregate portfolio
exposures. We typically seek to maximize the resale margin performance of our
inventory in the context of managing risk through monitoring sell-through rates,
holding periods, and portfolio aging. Similarly, we evaluate our portfolio
health metrics relative to the broader market (as observed on the multiple
listing services ("MLS")) as another key indicator of inventory management
performance. One such metric is our percentage of homes "on the market" for
greater than 120 days (as measured from initial listing date). As of June 30,
2022 , such homes represented 5% of our portfolio, compared to 15% for the
broader market when filtered for the types of homes we are able to underwrite
and acquire in a given market based on characteristics such as price range, home
type, home location, year built and lot size (defined as our "Buybox").
Given increases in interest rates and broad softening in housing market demand,
we anticipate that our performance in the second half of 2022 will reflect a
transition in the housing market from peak levels earlier this year to lower
transaction velocity and lower home price appreciation beyond typical seasonal
trends. Given our focus on inventory health and risk management, we have
adjusted down listed prices on our inventory to stay in-line with the market. We
have also adjusted our pricing on new home acquisitions via higher spreads.
While this has the effect of reducing our acquisition pace to allow us to manage
overall inventory growth, we also expect future margins on those acquisition
cohorts to be in-line with our expectations. We expect to resume a higher
acquisition pace as the housing market stabilizes.
Inventory Financing
Our business model is working capital intensive and inventory financing is a key
enabler of our growth. We primarily rely on our access to non-recourse
asset-backed debt, which consists of asset-backed senior debt facilities and
asset-backed mezzanine term debt facilities, to finance our home acquisitions.
See "-Liquidity and Capital Resources - Debt and Financing Arrangements."
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Management's Discussion and Analysis of Financial Condition and Results of
Operations(Tabular amounts in millions, except share and per share data and ratios, or as
noted)
Seasonality
The residential real estate market is seasonal, with greater demand and home
price appreciation from home buyers in the spring and summer, and typically
weaker demand and lower home price appreciation in late fall and winter. In
general, we expect our financial results and working capital requirements to
reflect seasonal variations over time. However, other factors such as growth,
market expansion and changes in macroeconomic conditions, have obscured the
impact of seasonality in our historical financials and we expect may continue to
do so.
Non-GAAP Financial Measures
In addition to our results of operations below, we report certain financial
measures that are not required by, or presented in accordance with,
These measures have limitations as analytical tools when assessing our operating performance and should not be considered in isolation or as a substitute for GAAP measures, including gross profit and net income. We may calculate or present our non-GAAP financial measures differently than other companies who report measures with similar titles and, as a result, the non-GAAP financial measures we report may not be comparable with those of companies in our industry or in other industries.
Adjusted Gross Profit, Contribution Profit and Contribution Profit After Interest
To provide investors with additional information regarding our margins and return on inventory acquired, we have included Adjusted Gross Profit, Contribution Profit and Contribution Profit After Interest, which are non-GAAP financial measures. We believe that Adjusted Gross Profit, Contribution Profit and Contribution Profit After Interest are useful financial measures for investors as they are supplemental measures used by management in evaluating unit level economics and our operating performance. Each of these measures is intended to present the economics related to homes sold during a given period. We do so by including revenue generated from homes sold (and adjacent services) in the period and only the expenses that are directly attributable to such home sales, even if such expenses were recognized in prior periods, and excluding expenses related to homes that remain in inventory as of the end of the period. Contribution Profit provides investors a measure to assessOpendoor's ability to generate returns on homes sold during a reporting period after considering home purchase costs, renovation and repair costs, holding costs and selling costs. Contribution Profit After Interest further impacts gross profit by including senior interest costs attributable to homes sold during a reporting period. We believe these measures facilitate meaningful period over period comparisons and illustrate our ability to generate returns on assets sold after considering the costs directly related to the assets sold in a given period. Adjusted Gross Profit, Contribution Profit and Contribution Profit After Interest are supplemental measures of our operating performance and have limitations as analytical tools. For example, these measures include costs that were recorded in prior periods under GAAP and exclude, in connection with homes held in inventory at the end of the period, costs required to be recorded under GAAP in the same period. Accordingly, these measures should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. We include a reconciliation of these measures to the most directly comparable GAAP financial measure, which is gross profit.
Adjusted Gross Profit / Margin
We calculate Adjusted Gross Profit as gross profit under GAAP adjusted for
(1) inventory valuation adjustment in the current period, and (2) inventory
valuation adjustment in prior periods. Inventory valuation adjustment in the
current period is calculated by adding back the inventory valuation adjustments
recorded during the period on homes that remain in inventory at period end.
Inventory valuation adjustment in prior periods is calculated by subtracting the
inventory valuation adjustments recorded in prior periods on homes sold in the
current period. We define Adjusted Gross Margin as Adjusted Gross Profit as
a percentage of revenue. See "-Critical Accounting Policies and Estimates- Real
Estate Inventory" for detailed discussion of inventory valuation adjustment.
We view this metric as an important measure of business performance as it
captures gross margin performance isolated to homes sold in a given period and
provides comparability across reporting periods. Adjusted Gross Profit helps
management assess home pricing, service fees and renovation performance for a
specific resale cohort.
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OPENDOOR TECHNOLOGIES INC.
Management's Discussion and Analysis of Financial Condition and Results of
Operations(Tabular amounts in millions, except share and per share data and ratios, or as
noted)Contribution Profit / Margin
We calculate Contribution Profit as Adjusted Gross Profit, minus certain costs incurred on homes sold during the current period including: (1) holding costs incurred in the current period, (2) holding costs incurred in prior periods, and (3) direct selling costs. The composition of our holding costs is described in the footnotes to the reconciliation table below. Contribution Margin is Contribution Profit as a percentage of revenue.
We view this metric as an important measure of business performance as it captures the unit level performance isolated to homes sold in a given period and provides comparability across reporting periods. Contribution Profit helps management assess inflows and outflows directly associated with a specific resale cohort.
Contribution Profit / Margin After Interest
We define Contribution Profit After Interest as Contribution Profit, minus interest expense under our non-recourse asset-backed senior debt facilities incurred on the homes sold during the period. This may include interest expense recorded in periods prior to the period in which the sale occurred. Our asset-backed senior debt facilities are secured by our real estate inventory and cash. See "- Liquidity and Capital Resources - Debt and Financing Arrangements." In addition to our senior debt facilities, we use a mix of debt and equity capital to finance our inventory and that mix will vary over time. We expect to continue to evolve our cost of financing as we include other debt sources beyond mezzanine capital. As such, in order to allow more meaningful period over period comparisons that more accurately reflect our asset performance rather than our evolving financing choices, we do not include interest expense associated with our mezzanine term debt facilities in this calculation. Contribution Margin After Interest is Contribution Profit After Interest as a percentage of revenue.
We view this metric as an important measure of business performance. Contribution Profit After Interest helps management assess Contribution Margin performance, per above, when burdened with the cost of senior financing.
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OPENDOOR TECHNOLOGIES INC.
Management's Discussion and Analysis of Financial Condition and Results of
Operations(Tabular amounts in millions, except share and per share data and ratios, or as
noted)
The following table presents a reconciliation of our Adjusted Gross Profit,
Contribution Profit and Contribution Profit After Interest to our gross profit,
which is the most directly comparable GAAP measure, for the periods indicated:
Three Months Ended Six Months Ended
June 30, June 30,
(in millions, except percentages) 2022 2021 2022 2021
Gross profit (GAAP) $ 486 $ 159 $ 1,021 $ 256
Gross Margin 11.6 % 13.4 % 10.9 % 13.2 %
Adjustments:
Inventory valuation adjustment - Current
Period(1)(2) 82 1 85 1
Inventory valuation adjustment -
Prior Periods(1)(3) (12) - (38) -
Adjusted Gross Profit $ 556 $ 160 $ 1,068 $ 257
Adjusted Gross Margin 13.2 % 13.5 % 11.4 % 13.3 %
Adjustments:
Direct selling costs(4) (100) (26) (236) (44)
Holding costs on sales - Current Period(5)(6) (11) (3) (42) (7)
Holding costs on sales - Prior Periods(5)(7) (23) (3) (36) (2)
Contribution Profit $ 422 $ 128 $ 754 $ 204
Contribution Margin 10.1 % 10.8 % 8.1 % 10.5 %
Adjustments:
Interest on homes sold - Current Period(8)(9) (12) (3) (42) (7)
Interest on homes sold - Prior Periods(8)(10) (21) (2) (33) (1)
Contribution Profit After Interest $ 389
9.3 % 10.4 % 7.3 % 10.1 %
________________
(1)Inventory valuation adjustment includes adjustments to record real estate
inventory at the lower of its carrying amount or its net realizable value. See
"-Critical Accounting Policies and Estimates - Real Estate Inventory."
(2)Inventory valuation adjustment - Current Period is the inventory valuation adjustments recorded during the period presented associated with homes that remain in inventory at period end.
(3)Inventory valuation adjustment - Prior Periods is the inventory valuation adjustments recorded in prior periods associated with homes that sold in the period presented.
(4)Represents selling costs incurred related to homes sold in the relevant period. This primarily includes broker commissions, external title and escrow-related fees and transfer taxes.
(5)Holding costs include mainly property taxes, insurance, utilities, homeowners association dues, cleaning and maintenance costs. Holding costs are included in Sales, marketing, and operations on the Condensed Consolidated Statements of Operations.
(6)Represents holding costs incurred in the period presented on homes sold in the period presented.
(7)Represents holding costs incurred in prior periods on homes sold in the period presented.
(8)This does not include interest on mezzanine term debt facilities or other indebtedness. See "- Liquidity and Capital Resources - Debt and Financing Arrangements."
(9)Represents the interest expense under our asset-backed senior debt facilities incurred during the period presented on homes sold in the period presented.
(10)Represents the interest expense under our asset-backed senior debt facilities incurred during prior periods on homes sold in the period presented.
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OPENDOOR TECHNOLOGIES INC.
Management's Discussion and Analysis of Financial Condition and Results of
Operations(Tabular amounts in millions, except share and per share data and ratios, or as
noted)Adjusted Net Income (Loss) and Adjusted EBITDA
We also present Adjusted Net Income (Loss) and Adjusted EBITDA, which are non-GAAP financial measures that management uses to assess our underlying financial performance. These measures are also commonly used by investors and analysts to compare the underlying performance of companies in our industry. We believe these measures provide investors with meaningful period over period comparisons of our underlying performance, adjusted for certain charges that are non-recurring, non-cash, not directly related to our revenue-generating operations or not aligned to related revenue. Adjusted Net Income (Loss) and Adjusted EBITDA are supplemental measures of our operating performance and have important limitations. For example, these measures exclude the impact of certain costs required to be recorded under GAAP. These measures also include inventory valuation adjustments that were recorded in prior periods under GAAP and exclude, in connection with homes held in inventory at the end of the period, inventory valuation adjustments required to be recorded under GAAP in the same period. These measures could differ substantially from similarly titled measures presented by other companies in our industry or companies in other industries. Accordingly, these measures should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. We include a reconciliation of these measures to the most directly comparable GAAP financial measure, which is net loss.
Adjusted Net Income (Loss)
We calculate Adjusted Net Income (Loss) as GAAP net loss adjusted to exclude non-cash expenses of stock-based compensation, equity securities fair value adjustment, warrant fair value adjustment, and intangibles amortization expense. It also excludes non-recurring gain on lease termination, payroll tax on initial RSU release, and legal contingency accrual and related expenses. Adjusted Net Income (Loss) also aligns the timing of inventory valuation adjustments recorded under GAAP to the period in which the related revenue is recorded in order to improve the comparability of this measure to our non-GAAP financial measures of unit economics, as described above. Our calculation of Adjusted Net Income (Loss) does not currently include the tax effects of the non-GAAP adjustments because our taxes and such tax effects have not been material to date.
Adjusted EBITDA
We calculated Adjusted EBITDA as Adjusted Net Income (Loss) adjusted for
depreciation and amortization, property financing and other interest expense,
interest income, and income tax expense. Adjusted EBITDA is a supplemental
performance measure that our management uses to assess our operating performance
and the operating leverage in our business.
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OPENDOOR TECHNOLOGIES INC.
Management's Discussion and Analysis of Financial Condition and Results of
Operations(Tabular amounts in millions, except share and per share data and ratios, or as
noted)
The following table presents a reconciliation of our Adjusted Net Income (Loss)
and Adjusted EBITDA to our net loss, which is the most directly comparable GAAP
measure, for the periods indicated:
Three Months Ended Six Months Ended
June 30, June 30,
(in millions, except percentages) 2022 2021 2022 2021
Net loss (GAAP) $ (54) $ (144) $ (26) $ (414)
Adjustments:
Stock-based compensation 59 164 126 403
Equity securities fair value adjustment(1) 3 - 25 -
Warrant fair value adjustment(1) - (24) - (9)
Intangibles amortization expense(2) 3 1 5 1
Inventory valuation adjustment -
Current Period(3)(4) 82 1 85 1
Inventory valuation adjustment - Prior
Periods(3)(5) (12) - (38) -
Gain on lease termination - - - (5)
Payroll tax on initial RSU release - 5 - 5
Legal contingency accrual and related expenses 42 - 45 -
Other(6) (1) - (1) -
Adjusted Net Income (Loss) $ 122 $ 3 $ 221 $ (18)
Adjustments:
Depreciation and amortization, excluding
amortization of intangibles and right of use
assets 12 7 21 16
Property financing(7) 76 12 134 19
Other interest expense(8) 13 4 23 8
Interest income(9) (6) (1) (6) (2)
Income tax expense 1 - 1 -
Adjusted EBITDA $ 218 $ 25 $ 394 $ 23
Adjusted EBITDA Margin 5.2 % 2.2 % 4.2 % 1.2 %
________________
(1)Represents the gains and losses on certain financial instruments, which are marked to fair value at the end of each period.
(2)Represents amortization of acquisition-related intangible assets. The acquired intangible assets have useful lives ranging from 1 to 5 years and amortization is expected until the intangible assets are fully amortized.
(3)Inventory valuation adjustment includes adjustments to record real estate inventory at the lower of its carrying amount or its net realizable value.
(4)Inventory valuation adjustment - Current Period is the inventory valuation adjustments recorded during the period presented associated with homes that remain in inventory at period end.
(5)Inventory valuation adjustment - Prior Periods is the inventory valuation adjustments recorded in prior periods associated with homes that sold in the period presented. (6)Includes primarily gain or loss on interest rate lock commitments, gain or loss on the sale of available for sale securities, sublease income, and income from equity method investments.
(7)Includes interest expense on our non-recourse asset-backed debt facilities.
(8)Includes amortization of debt issuance costs and loan origination fees, commitment fees, unused fees, other interest related costs on our asset-backed debt facilities, interest expense related to the 2026 convertible senior notes outstanding, and interest expense on other secured borrowings.
(9)Consists mainly of interest earned on cash, cash equivalents and marketable securities.
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Management's Discussion and Analysis of Financial Condition and Results of
Operations(Tabular amounts in millions, except share and per share data and ratios, or as
noted)Components of Our Results of Operations
Revenue
We generate the majority of our revenue from the sale of homes that we previously acquired from homeowners. In addition, we generate revenue from additional services we provide to both home sellers and buyers, which consists primarily of title insurance and escrow services, Buy withOpendoor and mortgage financing services. Home sales revenue from selling residential real estate is recognized when title to and possession of the property has transferred to the buyer and we have no continuing involvement with the property, which is generally the close of escrow. The amount of revenue recognized for each home sale is equal to the sale price of the home net of any concessions.
Cost of Revenue
Cost of revenue includes the property purchase price, acquisition costs and direct costs to renovate or repair the home. These costs are accumulated in real estate inventory during the property holding period and charged to cost of revenue under the specific identification method when the property is sold. Real estate inventory is reviewed for valuation adjustments at least quarterly. If the carrying amount or basis is not expected to be recovered, an inventory valuation adjustment is recorded to cost of revenue and the related assets are adjusted to their net realizable value. Additionally, for our revenue other than home sales revenue, cost of revenue consists of any costs incurred in delivering the service, including associated headcount expenses such as salaries, benefits and stock-based compensation. Operating Expenses
Sales, Marketing and Operations Expense
Sales, marketing and operations expense consists primarily of broker commissions (paid to the home buyers' real estate agents and third-party listing agents, if applicable), resale closing costs, holding costs related to real estate inventory including utilities, property taxes and maintenance, and expenses associated with product marketing, promotions and brand-building. Sales, marketing and operations expense also includes any headcount expenses in support of sales, marketing, and real estate operations such as salaries, benefits and stock-based compensation.
General and Administrative Expense
General and administrative expense consists primarily of headcount expenses, including salaries, benefits and stock-based compensation for our executive, finance, human resources, legal and administrative personnel, third-party professional services fees and rent expense.
Technology and Development Expense
Technology and development expense consists primarily of headcount expenses, including salaries, benefits and stock-based compensation for employees in the design, development, testing, maintenance and operation of our mobile applications, websites, tools and applications that support our products. Technology and development expense also includes amortization of capitalized software development costs.
Warrant Fair Value Adjustment
Warrant fair value adjustment consists of unrealized gains and losses as a result of marking our Sponsor Warrants, assumed upon closing of the Business Combination, to fair value at the end of each reporting period. OnJuly 9, 2021 , the Company completed the redemption of all of its outstanding Sponsor Warrants.
Interest Expense
Interest expense consists primarily of interest paid or payable and the
amortization of debt discounts and debt issuance costs. Interest expense varies
period over period, primarily due to fluctuations in our inventory volumes and
changes in the
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Management's Discussion and Analysis of Financial Condition and Results of
Operations(Tabular amounts in millions, except share and per share data and ratios, or as
noted)Benchmark Rate, which impact the interest incurred on our senior revolving credit facilities (see "- Liquidity and Capital Resources - Debt and Financing Arrangements").
We expect our overall interest expense to increase as inventory increases. Subject to market conditions and cost of capital trade-offs, we will evaluate opportunities to expand our sources of financing over time, which may allow us to diversify our mix of financing sources to include more cost effective financing relative to our higher cost mezzanine term debt facilities.
Other Income - Net
Other income-net consists primarily of change in fair value of and dividend income from our investment in equity securities as well as interest income from our investment in money market funds, time deposits, and debt securities.
Income Tax Expense
We record income taxes using the asset and liability method. Under this method, deferred income tax assets and liabilities are recorded based on the estimated future tax effects of differences between the financial statement and income tax basis of existing assets and liabilities. These differences are measured using the enacted statutory tax rates that are expected to apply to taxable income for the years in which differences are expected to reverse. We recognize the effect on deferred income taxes of a change in tax rates in income in the period that includes the enactment date.
We record a valuation allowance to reduce our deferred tax assets and liabilities to the net amount that we believe is more likely than not to be realized. We consider all available evidence, both positive and negative, including historical levels of income, expectations and risks associated with estimates of future taxable income and ongoing tax planning strategies in assessing the need for a valuation allowance.
Results of Operations
The following table sets forth our results of operations for each of the periods
presented:
Three Months Ended
June 30, Change in
(in thousands, except percentages) 2022 2021 $ %
Revenue $ 4,198 $ 1,186 $ 3,012 254 %
Cost of revenue 3,712 1,027 2,685 261 %
Gross profit 486 159 327 206 %
Operating expenses:
Sales, marketing and operations 276 97 179 185 %
General and administrative 137 190 (53) (28) %
Technology and development 41 24 17 71 %
Total operating expenses 454 311 143 46 %
Income (loss) from operations 32 (152) 184 (121) %
Warrant fair value adjustment - 24 (24) (100) %
Interest expense (89) (16) (73) 456 %
Other income-net 4 - 4 N/M
Loss before income taxes (53) (144) 91 (63) %
Income tax expense (1) - (1) N/M
Net loss $ (54) $ (144) $ 90 (63) %
N/M - Not meaningful.
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Management's Discussion and Analysis of Financial Condition and Results of
Operations
(Tabular amounts in millions, except share and per share data and ratios, or as
noted)
Six Months Ended
June 30, Change in
(in thousands, except percentages) 2022 2021 $ %
Revenue $ 9,349 $ 1,933 $ 7,416 384 %
Cost of revenue 8,328 1,677 6,651 397 %
Gross profit 1,021 256 765 299 %
Operating expenses:
Sales, marketing and operations 552 166 386 233 %
General and administrative 238 412 (174) (42) %
Technology and development 81 75 6 8 %
Total operating expenses 871 653 218 33 %
Income (loss) from operations 150 (397) 547 (138) %
Warrant fair value adjustment - 9 (9) (100) %
Interest expense (157) (27) (130) 481 %
Other income-net (18) 1 (19) N/M
Loss before income taxes (25) (414) 389 (94) %
Income tax expense (1) - (1) N/M
Net loss $ (26) $ (414) $ 388 (94) %
N/M - Not meaningful.
Revenue
Revenue increased by $3.0 billion , or 254%, for the three months ended June 30,
2022 compared to the three months ended June 30, 2021 . The increase in revenue
was primarily attributable to higher sales volumes as well as higher revenue per
home. We sold 10,482 homes during the three months ended June 30, 2022 , compared
to 3,481 homes during the three months ended June 30, 2021 , representing an
increase of 201% and revenue per home sold increased 18% between periods.
Average resale prices were positively impacted by price mix within markets,
overall home price appreciation and Buybox expansion.
Revenue increased by $7.4 billion , or 384%, for the six months ended June 30,
2022 compared to the six months ended June 30, 2021 . The increase in revenue was
primarily attributable to higher sales volumes as well as higher revenue per
home. We sold 23,151 homes during the six months ended June 30, 2022 , compared
to 5,943 homes during the six months ended June 30, 2021 , representing an
increase of 290% and revenue per home sold increased 24% between periods.
Average resale prices were positively impacted by price mix within markets,
overall home price appreciation and Buybox expansion.
Cost of Revenue and Gross Profit
Cost of revenue increased by$2.7 billion , or 261%, for the three months endedJune 30, 2022 compared to the three months endedJune 30, 2021 . The increase in cost of revenue was primarily attributable to higher sales volumes and a 20% increase in cost of revenue per home as a result of inventory mix, home price appreciation and Buybox expansion. The increase in cost of revenue per home is consistent with the 18% increase in revenue per home. Cost of revenue increased by$6.7 billion , or 397%, for the six months endedJune 30, 2022 compared to the six months endedJune 30, 2021 . The increase in cost of revenue was primarily attributable to higher sales volumes and a 27% increase in cost of revenue per home as a result of inventory mix, home price appreciation and Buybox expansion. The increase in cost of revenue per home is consistent with the 24% increase in revenue per home. Gross profit increased from$159 million to$486 million and gross margin decreased from 13.4% to 11.6% for the three months endedJune 30, 2021 andJune 30, 2022 , respectively. For the same periods, Adjusted Gross Margin decreased from 13.5% to 13.2%. Gross margin and Adjusted Gross Margin for the three months endedJune 30, 2021 benefited from a fresh book of inventory after the Company sold down its inventory to a low point of$152 million as ofSeptember 30, 2020 in response to the COVID-19 pandemic. In addition, our gross margin and Adjusted Gross Margins for the three months endedJune 30, 2021 were elevated due to more conservative underwriting as we initially relaunched operations in the second half of 2020. We also recorded$82 million of inventory valuation adjustments during the three months endedJune 30, 2022 associated with homes that remain in inventory at period end as compared to$1 million during the three months endedJune 30, 2021 . The decrease in gross margin and Adjusted Gross Margin between the three months endedJune 30, 2021 andJune 30, 2022 is 40
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OPENDOOR TECHNOLOGIES INC.
Management's Discussion and Analysis of Financial Condition and Results of
Operations(Tabular amounts in millions, except share and per share data and ratios, or as
noted)
reflective of the expected moderation in margins as our inventory mix normalized
and the elimination of excess conservatism in our underwriting standards.
Contribution Margin decreased from 10.8% to 10.1%, due to the reasons noted
above as well as increased direct selling and holding costs. See "- Non-GAAP
Financial Measures."
Gross profit increased from $256 million to $1.0 billion and gross margin
decreased from 13.2% to 10.9% for the six months ended June 30, 2021 and
June 30, 2022 , respectively. For the same periods, Adjusted Gross Margin
decreased from 13.3% to 11.4%. Gross margin and Adjusted Gross Margin for the
six months ended June 30, 2021 benefited from a fresh book of inventory and more
conservative underwriting as discussed above. In addition, we recorded $85
million of inventory valuation adjustments during the six months ended June 30,
2022 associated with homes that remain in inventory at period end as compared to
$1 million during the six months ended June 30, 2021 . Contribution Margin
decreased from 10.5% to 8.1% due to the reasons noted above as well as increased
direct selling and holding costs. See "- Non-GAAP Financial Measures."
Operating Expenses
Sales, Marketing and Operations. Sales, marketing and operations increased by$179 million , or 185%, for the three months endedJune 30, 2022 compared to the three months endedJune 30, 2021 . The increase was primarily attributable to a$74 million increase in resale transaction costs and broker commissions, consistent with the 201% increase in the number of homes sold. Property holding costs increased by$27 million , consistent with increased inventory levels and longer inventory holding periods compared to the three months endedJune 30, 2021 when we held a fresh book of inventory. Advertising expense increased$46 million , from$32 million for the three months endedJune 30, 2021 to$78 million for the three months endedJune 30, 2022 as we increased marketing to drive acquisition volumes in both existing and new markets. Headcount expenses, including salaries and benefits, increased$18 million consistent with the increase in headcount. Sales, marketing and operations increased by$386 million , or 233%, for the six months endedJune 30, 2022 compared to the six months endedJune 30, 2021 . The increase was primarily attributable to a$192 million increase in resale transaction costs and broker commissions, consistent with the 290% increase in the number of homes sold. Property holding costs increased by$60 million , consistent with increased inventory levels and longer inventory holding periods compared to the six months endedJune 30, 2021 when we held a fresh book of inventory. Advertising expense increased$71 million , from$56 million for the six months endedJune 30, 2021 to$127 million for the six months endedJune 30, 2022 as we increased marketing to drive acquisition volumes in both existing and new markets. Headcount expenses, including salaries and benefits, increased$36 million consistent with the increase in headcount. General and Administrative. General and administrative decreased by$53 million , or 28%, for the three months endedJune 30, 2022 compared to the three months endedJune 30, 2021 . The decrease was primarily attributable to a$113 million reduction in stock-based compensation due to the expense recognition of certain performance awards during the six months endedJune 30, 2021 following the consummation of the Business Combination inDecember 2020 . The reduction in stock-based compensation is partially offset by a$42 million legal contingency accrual recorded during the three months endedJune 30, 2022 . General and administrative decreased by$174 million , or 42%, for the six months endedJune 30, 2022 compared to the six months endedJune 30, 2021 . The decrease was primarily attributable to a$259 million reduction in stock-based compensation due to the expense recognition of certain performance awards during the six months endedJune 30, 2021 following the consummation of the Business Combination inDecember 2020 as well as the recognition of expense related to certain restricted stock units ("RSUs") upon the fulfillment of the liquidity event vesting condition satisfied by theFebruary 2021 Offering. The reduction in stock-based compensation is partially offset by a$45 million legal contingency accrual recorded during the six months endedJune 30, 2022 . In addition, headcount expenses, including salaries and benefits, increased$13 million consistent with the increase in headcount. Technology and Development. Technology and development increased by$17 million , or 71%, for the three months endedJune 30, 2022 compared to the three months endedJune 30, 2021 . The increase was primarily attributable to a$10 million increase in headcount expenses, including salaries and benefits, and stock-based compensation consistent with the increase in headcount.
Technology and development increased by a nominal amount for the six months
ended
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Management's Discussion and Analysis of Financial Condition and Results of
Operations(Tabular amounts in millions, except share and per share data and ratios, or as
noted)Warrant Fair Value Adjustment
Warrant fair value adjustment decreased by$24 million , or 100% for the three months endedJune 30, 2022 compared to the three months endedJune 30, 2021 . The gain recorded for the three months endedJune 30, 2021 was attributable to a decrease in the fair value of the Sponsor Warrants, which was primarily attributable to the decline in the Company's stock price over this period. OnJuly 9, 2021 , the Company completed the redemption of all of its outstanding Sponsor Warrants.
Warrant fair value adjustment decreased by a nominal amount for the six months
ended
Interest Expense
Interest expense increased by$73 million , or 456%, for the three months endedJune 30, 2022 compared to the three months endedJune 30, 2021 . The increase was primarily attributable to increases in the average outstanding balance of our asset-backed senior debt facilities, which is consistent with our increase in inventory over the same periods, and increases in the average outstanding balance of mezzanine term debt facilities. In addition, interest expense from our Asset-backed Senior Revolving Credit Facilities, which bear interest at a floating reference rate based on LIBOR or SOFR, has increased due to increases in these reference rates during the three months endedJune 30, 2022 . Interest expense increased by$130 million , or 481%, for the six months endedJune 30, 2022 compared to the six months endedJune 30, 2021 . The increase was primarily attributable to increases in the average outstanding balance of our asset-backed senior debt facilities, which is consistent with our increase in inventory over the same periods, and increases in the average outstanding balance of mezzanine term debt facilities. In addition, interest expense from our Asset-backed Senior Revolving Credit Facilities, which bear interest at a floating reference rate based on LIBOR or SOFR, has increased due to increases in these reference rates primarily during the three months endedJune 30, 2022 .
Other Income - Net
Other income - net increased by a nominal amount for the three months ended
Other income - net decreased by$19 million for the six months endedJune 30, 2022 compared to the six months endedJune 30, 2021 . The decrease is primarily related to a$25 million unrealized fair value adjustment recorded to our investment in equity securities during the six months endedJune 30, 2022 .
Income Tax Expense
Income tax expense increased by a nominal amount for the three and six months
ended
Liquidity and Capital Resources
Overview
Our principal sources of liquidity have historically consisted of cash generated from our operations and from financing activities. As ofJune 30, 2022 , we had cash and cash equivalents of$2.2 billion , restricted cash of$615 million , and marketable securities of$233 million . The Company had total outstanding balances on our asset-backed debt and other secured borrowings of$6.6 billion and aggregate principal outstanding from Convertible Senior Notes of$978 million . In addition, we had undrawn borrowing capacity of$4.7 billion under our non-recourse asset-backed debt facilities (as described further below), of which$2.1 billion was fully committed. OnFebruary 9, 2021 , we completed an underwritten public offering (the "February 2021 Offering") in which we sold 32,817,421 shares of our common stock at a public offering price of$27.00 per share, including the exercise in full by the underwriters of their option to purchase up to 4,280,533 additional shares of common stock, which was completed onFebruary 11, 2021 . We received aggregate net proceeds from theFebruary 2021 Offering of approximately$859 million after deducting underwriting discounts and commissions and offering expenses payable by us. 42
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Management's Discussion and Analysis of Financial Condition and Results of
Operations(Tabular amounts in millions, except share and per share data and ratios, or as
noted)
In August 2021 , we issued 0.25% convertible senior notes due in 2026 (the
"2026 Notes") with an aggregate principal amount of $978 million , which resulted
in net proceeds after underwriting fees and other transactions costs of
$953 million . In connection with the issuance of the 2026 Notes, the Company
purchased capped calls from certain financial institutions at a cost of
$119 million .
We have incurred losses from inception through December 31, 2021 and had net
income for the first time during the three months ended March 31, 2022 . We
incurred a net loss during the three months ended June 30, 2022 and expect to
incur additional losses in the future. Our ability to service our debt, fund
working capital, business operations and capital expenditures will depend on our
ability to generate cash from operating activities, which is subject to our
future operating success, and obtain inventory acquisition financing on
reasonable terms, which is subject to factors beyond our control, including
general economic, political and financial market conditions.
We expect that our working capital requirements may increase should our
inventory balance increase over the remainder of the year. We believe our cash,
cash equivalents, and marketable securities together with cash we expect to
generate from future operations and borrowings, will be sufficient to meet our
working capital and capital expenditure requirements for a period of at least
twelve months from the date of this Quarterly Report on Form 10-Q.
Debt and Financing Arrangements
Our financing activities include: short-term borrowings under our asset-backed senior revolving credit facilities and our mortgage repurchase financing; the issuance of long-term asset-backed senior term debt, asset-backed mezzanine term debt, and convertible debt; and new issuances of equity. Historically, we have required access to external financing resources in order to fund growth, expansion into new markets and strategic initiatives and we expect this to continue in the future. Our access to capital markets can be impacted by factors outside our control, including economic conditions. We primarily use non-recourse asset-backed debt, consisting of asset-backed senior debt facilities and asset-backed mezzanine term debt facilities to provide financing for our real estate inventory purchases and renovations. Our business is capital intensive and maintaining adequate liquidity and capital resources is needed as we continue to scale and accumulate additional inventory. While there can be no assurance that these trends will continue, we have observed increased availability and engagement for this lending product across a variety of financial institutions and we have been able to improve terms and increase our borrowing capacity in recent years. We actively manage our relationships with multiple financial institutions and seek to optimize duration, flexibility, efficiency and cost of funds. Our asset-backed facilities are each collateralized by a specified pool of assets, consisting of real estate inventory, restricted cash and equity interests in certain consolidated subsidiaries ofOpendoor that directly or indirectly own our real estate inventory. The terms of our inventory financing facilities requireOpendoor 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 equity). As ofJune 30, 2022 , the Company was in compliance with all financial covenants. Our real estate-owning subsidiaries' assets and credit generally are not available to satisfy the debts and other obligations of any otherOpendoor entities except to the extent otherOpendoor entities are also a party to the relevant financing arrangements. Our asset-backed debt is non-recourse toOpendoor except for limited guarantees provided by anOpendoor subsidiary for certain obligations in situations involving "bad acts" by anOpendoor entity and certain other limited circumstances that are generally under our control. Our asset-backed senior debt facilities generally provide for advance rates of 80% to 90% against our cost basis in the underlying properties upon acquisition and our mezzanine term facilities will finance up to 100% of our cost basis in the underlying properties upon acquisition. The maximum initial advance rates for a given financed property vary by facility and generally decrease on a fixed timeline that varies by facility based on the length of time the property has been financed and any other facility-specific adjustments. 43
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OPENDOOR TECHNOLOGIES INC.
Management's Discussion and Analysis of Financial Condition and Results of
Operations(Tabular amounts in millions, except share and per share data and ratios, or as
noted)
The following table summarizes certain details related to our non-recourse
asset-backed debt and other secured borrowings as of June 30, 2022 (in millions,
except interest rates):
Outstanding Amount
Weighted
Borrowing Average End of Revolving / Final Maturity
June 30, 2022 Capacity Current Non-Current Interest Rate Withdrawal Period Date
Non-Recourse Asset-backed
Debt:
Asset-backed Senior
Revolving Credit
Facilities
Revolving Facility 2018-2 $ 1,000 $ 104 $ - 3.07 % June 7, 2024 June 7, 2024
Revolving Facility 2018-3 750 271 - 2.62 % May 26, 2024 May 26, 2024
Revolving Facility 2019-1 900 876 - 3.43 % June 30, 2023 June 30, 2023
Revolving Facility 2019-2 1,850 1,809 - 2.89 % July 8, 2023 July 8, 2024
Revolving Facility 2019-3 925 252 - 3.42 % April 5, 2024 April 5, 2025
Revolving Facility 2021-1 125 50 - 2.46 % October 31, 2022 October 31, 2022
Asset-backed Senior Term
Debt Facilities
Term Debt Facility
2021-S1 400 - 400 3.48 % April 1, 2024 April 1, 2025
Term Debt Facility
2021-S2 600 - 500 3.20 % September 10, 2024 September 10, 2025
Term Debt Facility
2021-S3 1,000 - 500 3.75 % January 31, 2027 July 31, 2027
Term Debt Facility
2022-S1 250 - 250 4.07 % March 1, 2025 September 1, 2025
Total $ 7,800 $ 3,362 $ 1,650
Issuance Costs (16)
Carrying Value $ 1,634
Asset-backed Mezzanine
Term Debt Facilities
Term Debt Facility
2020-M1 3,000 - 1,500 10.00 % April 1, 2025 April 1, 2026
Term Debt Facility
2022-M1 500 - 75 10.00 % September 15, 2025 September 15, 2026
Total $ 3,500 $ - $ 1,575
Issuance Costs (33)
Carrying Value $ 1,542
Total Non-Recourse
Asset-backed Debt $ 11,300 $ 3,362 $ 3,176
Recourse Debt - Other
Secured Borrowings:
Mortgage Financing
Repo Facility 2019-R1 $ 100 $ 12 $ - 2.43 % May 25, 2023 May 25, 2023
Total Recourse Debt $ 100 $ 12 $ -
Asset-backed Senior Revolving Credit Facilities
We classify the senior revolving credit facilities as current liabilities on our condensed consolidated balance sheets. In some cases, the borrowing capacity amounts under the asset-backed senior revolving credit facilities as reflected in the table are not fully committed and any borrowings above those amounts are subject to the applicable lender's discretion. As ofJune 30, 2022 , we had fully committed borrowing capacity with respect to asset-backed senior revolving credit facilities of$4.3 billion . The revolving period end dates and final maturity dates reflected in the table above are inclusive of any extensions that are at the sole discretion of the Company. Certain of our asset-backed senior revolving credit facilities also have additional extension options that are subject to lender approval that are not reflected in the table above. 44
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OPENDOOR TECHNOLOGIES INC.
Management's Discussion and Analysis of Financial Condition and Results of
Operations(Tabular amounts in millions, except share and per share data and ratios, or as
noted)Asset-backed Senior Term Debt Facilities
We classify our senior term debt facilities as non-current liabilities in our condensed consolidated balance sheets. The carrying value of the non-current liabilities is reduced by issuance costs of$16 million . In some cases, the borrowing capacity amounts under the asset-backed senior term debt facilities as reflected in the table are not fully committed and any borrowings above those amounts are subject to the applicable lender's discretion. As ofJune 30, 2022 , we had fully committed borrowing capacity with respect to asset-backed senior term debt facilities of$1.9 billion . The withdrawal period end dates and final maturity dates reflected in the table above are inclusive of any extensions that are at the sole discretion of the Company. Certain of our asset-backed senior term debt facilities also have additional extension options that are subject to lender approval that are not reflected in the table above.
Asset-backed Mezzanine Term Debt Facilities
In addition to the asset-backed senior revolving credit facilities and asset-backed senior term debt facilities, we have issued asset-backed mezzanine term debt facilities which are subordinated to the related senior facilities. As ofJune 30, 2022 , we had fully committed borrowing capacity with respect to asset-backed mezzanine term debt facilities of$2.5 billion . Any borrowings above those amounts are not fully committed and subject to the applicable lender's discretion.
Mortgage Financing
We primarily use debt financing to fund our mortgage loan originations. In 2019 we entered into a master repurchase agreement to finance substantially all of the mortgage loans that we originate. Once our mortgage business sells a loan in the secondary mortgage market, we use the sale proceeds to reduce the outstanding balance under the repurchase facility.
Convertible Senior Notes
InAugust 2021 , we issued the 2026 Notes with an aggregate principal amount of$978 million . The table below summarizes certain details related to our 2026 Notes (in millions): Aggregate Unamortized Debt Net Carrying June 30, 2022 Principal Amount Issuance Costs Amount 2026 Notes $ 978 $ (22)$ 956
See "Part I - Item 1. Financial Statements - Notes to Condensed Consolidated Financial Statements - Note 6. Credit Facilities and Long-Term Debt" for additional information regarding our debt and financing arrangements.
Cash Flows
The following table summarizes our cash flows for the periods presented:
Six Months Ended
June 30,
(in millions) 2022 2021
Net cash used in operating activities $ (343) $ (2,312)
Net cash provided by (used in) investing activities $ 183 $ (174)
Net cash provided by financing activities $ 436 $ 2,670
Net increase in cash, cash equivalents, and restricted cash $ 276 Net cash used in operating activities was$343 million and$2.3 billion for the six months endedJune 30, 2022 and 2021, respectively. For the six months endedJune 30, 2022 , cash used in operating activities was primarily driven by the$622 million increase in real estate inventory. The impact of the change in operating working capital was partially offset by our net loss, net 45
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Management's Discussion and Analysis of Financial Condition and Results of
Operations(Tabular amounts in millions, except share and per share data and ratios, or as
noted)
of non-cash items, of $257 million . For the six months ended June 30, 2021 , cash
used in operating activities was primarily driven by a $2.2 billion increase in
real estate inventory and a $32 million increase in escrow receivable correlated
to the increase in revenue during the first half of 2021.
Net Cash Provided by (Used in) Investing Activities
Net cash provided by (used in) investing activities was$183 million and$(174) million for the six months endedJune 30, 2022 and 2021, respectively. For the six months endedJune 30, 2022 , cash provided by investing activities primarily consisted of a net decrease in marketable securities of$222 million , partially offset by$19 million for strategic investments in certain privately held companies and a$20 million increase in property and equipment. For the six months endedJune 30, 2021 , cash used in investing activities primarily consisted of the$153 million increase in marketable securities and the$10 million strategic investment in a privately held company. In addition, we used$11 million for capital expenditures, including internally developed software, employee computers and leasehold improvements.
Net Cash Provided by Financing Activities
Net cash provided by financing activities was$436 million and$2.7 billion for the six months endedJune 30, 2022 and 2021, respectively. For the six months endedJune 30, 2022 , cash provided by financing activities was primarily attributable to$446 million net proceeds on non-recourse asset-backed debt. For the six months endedJune 30, 2021 , cash provided by financing activities was primarily attributable to$1.8 billion net proceeds from non-recourse asset-backed debt and$886 million in proceeds from theFebruary 2021 Offering, net of$29 million issuance costs.
Contractual Obligations and Commitments
There have been no material changes outside the ordinary course of business in our commitments under contractual obligations as previously disclosed in our Annual Report on Form 10-K for the year endedDecember 31, 2021 , except for the categories of contractual obligations included in the table below, which have been updated to reflect our contractual obligations as ofJune 30, 2022 : Payment Due by Year Less than More than (in thousands) Total 1 year 1 - 3 years 3 - 5 years 5 years
Senior revolving credit facilities(1)
$ - $ - $ - Senior and mezzanine term debt facilities(2) 4,037 216 829 2,490 502 Mortgage financing(3) 12 12 - - - Purchase commitments(4) 3,173 3,173 - - - Total$ 10,618 $ 6,797 $ 829 $ 2,490 $ 502 ______________ (1)Represents the principal amounts outstanding as ofJune 30, 2022 . Includes estimated interest payments, calculated using the variable rate in existence at period end over an assumed holding period of 90 days. Borrowings under the senior revolving credit facilities are payable as the related inventory is sold. The payment is expected to be within one year ofJune 30, 2022 . (2)Represents the principal amounts outstanding as ofJune 30, 2022 and interest payments assuming the principal balances remain outstanding until maturity. The final maturity dates of the senior and mezzanine term debt facilities vary, as discussed above. (3)Represents the principal amounts outstanding as ofJune 30, 2022 . The facility provides short-term financing between the origination of a mortgage loan and when Opendoor Home Loans sells the loan to an investor. Included estimated interest payments, calculated using the variable rate in existence at period end over the Company's average holding period for mortgage loans.
(4)As of
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OPENDOOR TECHNOLOGIES INC.
Management's Discussion and Analysis of Financial Condition and Results of
Operations(Tabular amounts in millions, except share and per share data and ratios, or as
noted)Critical Accounting Policies and Estimates
Discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and related disclosure of contingent assets and liabilities, revenue, and expenses at the date of the financial statements. Generally, we base our estimates on historical experience and on various other assumptions in accordance with GAAP that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. We consider an accounting judgment, estimate or assumption to be critical when (1) the estimate or assumption is complex in nature or requires a high degree of judgment and (2) the use of different judgments, estimates and assumptions could have a material impact on the condensed consolidated financial statements. Based on this definition, critical accounting policies and estimates are discussed in "Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates" in the Annual Report. There have been no significant changes to these critical accounting estimates during the first six months of 2022. In addition, we have other key accounting policies and estimates that are described in "Part I - Item 1. Financial Statements -Notes to Condensed Consolidated Financial Statements - Note 1. Description of Business and Accounting Policies" in this Quarterly Report on Form 10-Q.
Recent Accounting Pronouncements
For information on recent accounting standards, see "Part I - Item 1. Financial Statements - Notes to Condensed Consolidated Financial Statements - Note 1. Description of Business and Accounting Policies".
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