Technology real estate company Offerpad (NYSE:OPAD) reported results ahead of analysts' expectations in Q1 CY2024, with revenue down 53.2% year on year to $285.4 million. On the other hand, next quarter's revenue guidance of $275 million was less impressive, coming in 22% below analysts' estimates. It made a GAAP loss of $0.64 per share, improving from its loss of $2.51 per share in the same quarter last year.

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“The first quarter of 2024 continued the positive trajectory we experienced exiting 2023. While the macro is still volatile, the first quarter was one of increasing stability and we believe this trend will continue through 2024,” said Brian Bair, Offerpad’s chairman and chief executive officer.

Known for giving homeowners cash offers within 24 hours, Offerpad (NYSE:OPAD) operates a tech-enabled platform specializing in direct home buying and selling solutions.

Real Estate Services

Technology has been a double-edged sword in real estate services. On the one hand, internet listings are effective at disseminating information far and wide, casting a wide net for buyers and sellers to increase the chances of transactions. On the other hand, digitization in the real estate market could potentially disintermediate key players like agents who use information asymmetries to their advantage.

Sales Growth

A company’s long-term performance can give signals about its business quality. Any business can put up a good quarter or two, but many enduring ones muster years of growth. Offerpad's revenue was flat over the last three years.

Within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends. That's why we also follow short-term performance. Offerpad's recent history shows a reversal from its three-year trend as its revenue has shown annualized declines of 44% over the last two years. 

We can dig even further into the company's revenue dynamics by analyzing its number of homes sold, which reached 847 in the latest quarter. Over the last two years, Offerpad's homes sold averaged 21.1% year-on-year declines. Because this number is higher than its revenue growth during the same period, we can see the company's monetization of its consumers has fallen.

This quarter, Offerpad's revenue fell 53.2% year on year to $285.4 million but beat Wall Street's estimates by 5.6%. The company is guiding for revenue to rise 19.5% year on year to $275 million next quarter, improving from the 78.7% year-on-year decrease it recorded in the same quarter last year. Looking ahead, Wall Street expects sales to grow 50.4% over the next 12 months, an acceleration from this quarter.

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Cash Is King

If you've followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills.

Over the last two years, Offerpad has shown mediocre cash profitability, putting it in a pinch as it gives the company limited opportunities to reinvest, pay down debt, or return capital to shareholders. Its free cash flow margin has averaged 6.9%, subpar for a consumer discretionary business.

Offerpad broke even from a free cash flow perspective in Q1. The company's margin regressed this quarter as it was 69.2 percentage points lower than in the same period last year.

Key Takeaways from Offerpad's Q1 Results

We enjoyed seeing Offerpad exceed analysts' revenue expectations this quarter as it sold more homes than anticipated (847 vs estimates of 800). On the other hand, its operating margin and EPS missed while its revenue guidance for the next quarter fell significantly short of Wall Street's estimates. Overall, the results could have been better. The company is down 1.4% on the results and currently trades at $7.26 per share.

Offerpad may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.