What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-10 compared with 2021-08-11 · 252 added, 207 removed, 431 unchanged (52% of the section changed)

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These investments have enabled us to help customers buy or sell homes in over 120,000 transactions and expand our footprint to 44 markets across the country.

Most importantly, we have scaled rapidly while delighting our customers with an experience that brings simplicity, certainty and speed to the home selling and buying process.

February 2021 Offering

On February 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 on February 11, 2021.

We received aggregate net proceeds from the February 2021 Offering of approximately $859.5 million after deducting underwriting discounts and commissions and offering expenses payable by us.

We currently intend to use the net proceeds from this offering to invest in increasing existing market penetration, to expand into new markets, and for working capital and general corporate purposes.

The Business Combination

We entered into a Merger Agreement with SCH, a special purpose acquisition company, on September 15, 2020.

Pursuant to the Merger Agreement, Merger Sub, a newly formed subsidiary of SCH, merged with and into Opendoor Labs Inc.

Upon the consummation of the Closing on December 18, 2020, the separate corporate existence of Merger Sub ceased;

Opendoor Labs Inc.

survived and became a wholly owned subsidiary of SCH, which was renamed Opendoor Technologies Inc.

The Business Combination was accounted for as a reverse recapitalization, in accordance with GAAP.

Under the guidance in ASC 805, Opendoor Technologies was treated as the “acquired” company for financial reporting purposes.

Opendoor Labs Inc.

was deemed the accounting predecessor of the combined business, and Opendoor Technologies, as the parent company of the combined business, was the successor SEC registrant, meaning that our financial statements for previous periods will be disclosed in the registrant’s future periodic reports filed with the SEC.

The Business Combination had a significant impact on our reported financial position and results as a consequence of the reverse recapitalization.

The most significant changes in Opendoor Technologies’ reported financial position and results are a net increase in cash of $970 million.

The increase in cash includes approximately $600 million in proceeds from the private placement (“PIPE Investment”) consummated substantially simultaneously with the Business Combination, offset by additional transaction costs for the Business Combination.

The transaction costs for the Business Combination are approximately $44 million, of which $14.5 million represents deferred underwriter fees related to SCH’s initial public offering.

As a result of the Business Combination, we became an SEC-registered and Nasdaq-listed company, and have hired additional personnel and implemented procedures and processes to address public company regulatory requirements and customary practices.

We have incurred and expect to incur additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees, and additional internal and external accounting, legal and

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

During the three months ended September 30, 2021, compared to the three months ended September 30, 2020:

• Revenue increased by $1.9 billion to $2.3 billion

• Homes sold increased by 4,756 to 5,988

• Gross profit increased by $166.7 million to $202.5 million;

gross margin decreased from 10.6% to 8.9%

• Net loss decreased by $24.0 million to $(56.8) million

• Adjusted Net Loss decreased by $19.2 million to $(17.3) million

• Contribution Profit increased by $149.7 million to $169.7 million;

Contribution Margin increased from 5.9% to 7.5%

• Adjusted EBITDA increased by $55.5 million to $34.5 million;

Adjusted EBITDA Margin increased from (6.2)% to 1.5%

During the three months ended September 30, 2021:

• Expanded to 44 markets with 5 new market launches

• Grew inventory to $6.3 billion, representing 17,164 homes

• Issued $977.5 million aggregate principal amount of 0.25% convertible senior notes due in 2026

Business Impact of COVID-19

In response to the COVID-19 pandemic and the consequent health risks, we substantially ceased purchasing additional homes in March 2020 to safeguard the health and safety of our customers and employees.

In addition to pausing new acquisitions, we sold down homes in inventory at a healthy pace, leading to a low point in inventory of $152 million as of September 30, 2020 compared to $1,312 million as of December 31, 2019.

As our revenues are dependent on inventory levels available for sale, we experienced sequential, quarter-over-quarter declines in revenue in the second, third and fourth quarters of 2020.

After retooling certain operational processes to enable “contactless” transactions, we resumed making offers to purchase homes in select markets in May 2020 and resumed operations across all of our markets by the end of August 2020.

We have been actively rebuilding our inventory since August 2020, exceeded pre-COVID-19 inventory levels in Q2 2021, and ended the third quarter of 2021 with $6,268.1 million in inventory.

Likewise, we returned to sequential revenue growth in the first three

OPENDOOR TECHNOLOGIES INC.

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(Tabular amounts in thousands, except share and per share data and ratios, or as noted)

administrative resources.

We estimate that these incremental costs will be approximately $15 million for the year ending December 31, 2021.

Business Impact of COVID-19

In December 2019, a novel strain of coronavirus (“COVID-19”) was reported and subsequently spread worldwide.

On March 11, 2020, the World Health Organization declared COVID-19 a pandemic.

After ensuring our ability to close transactions safely, seeing the lifting of shelter-in-place mandates, and retooling certain operational processes to enable “contactless” transactions, we resumed making offers to purchase homes in select markets in May 2020.

We resumed operations across all of our markets by the end of August 2020.

Despite pausing new acquisitions in March 2020, we continued to sell down inventory at a healthy pace, leading to a low point in home inventory of $152 million as of September 30, 2020 compared to inventory of $1,312 million as of December 31, 2019.

As our revenues are dependent on inventory levels available for sale, our top line was pressured due to limited inventory.

Accordingly, we experienced sequential, quarter-over-quarter declines in revenue in the second, third and fourth quarters of 2020.

We have been actively rebuilding our inventory since August 2020 and ended the second quarter of 2021 with $2,724 million in inventory.

Likewise, we returned to sequential revenue growth in the first and second quarters of 2021 and we expect this trend to continue for the remainder of the year.

quarters of 2021 and we expect this trend to continue in the fourth quarter of 2021.

See “— Components of Our Results of Operations — Revenue .”

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Our average hold period for homes purchased since January 2020, from acquisition to resale, ranged from 70 to 100 days and varied by market.

Home sales comprise the vast majority of our revenues today, but we expect increasing contribution from adjacent services as our current offerings mature and we introduce additional services over time.

To achieve our long-term margin objectives, we must both maintain pricing accuracy as the business expands and increase customer adoption of our newer services, such as Opendoor Home Loans, Buy with Opendoor, and List with Opendoor.

Home sales comprise the vast majority of our revenues today, but we expect increasing contribution from adjacent services as we grow our existing services and add new services over time.

To achieve our long-term margin objectives, we must both maintain pricing accuracy as the business expands and increase customer adoption of our newer services, such as Buy with Opendoor and Opendoor Home Loans.

We also plan to achieve operating leverage by growing our revenue at a faster pace than our fixed cost base, which includes general and administrative as well as technology and development expenses.

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Home sellers can visit our website or mobile app and answer a few questions about their home’s condition, features and upgrades.

For eligible homes, customers receive an initial home valuation range, which can be refreshed at any time through their personalized seller dashboard.

The majority of our initial offers are algorithmically generated and do not require any human intervention.

In order to finalize our offer, we conduct a free assessment to confirm all of the home details and identify any repairs that may need to be performed.

For eligible homes, customers receive a preliminary offer, which can be refreshed at any time through their personalized seller dashboard.

The vast majority of our preliminary offers are algorithmically generated and require minimal human intervention.

In order to finalize our offer, we conduct a free assessment to confirm all of the home details and leverage human expertise to identify any repairs that may need to be performed.

We have developed purpose-built software to guide home assessment workflows and collect over 100 unique data points regarding a home’s condition and quality, which we incorporate as structured data into our underlying pricing models.

Once completed, we finalize our offer, taking into consideration any necessary repairs, and produce the purchase agreement for the seller.

Our objective is to provide a competitive cash offer to sellers and we believe this approach builds trust with our potential customers.

Our business model is designed to generate margins from our service charge to sellers and adjacent products and services associated with a transaction, and not from the spread between acquisition price and resale price.

We closely track the number of potential sellers who accept the Opendoor offer versus listing their home on the MLS, and this conversion rate is an important factor for our growth.

OPENDOOR TECHNOLOGIES INC.

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

(Tabular amounts in thousands, except share and per share data and ratios, or as noted)

Our objective is to provide a transparent and competitive cash offer, which we believe instills trust in our potential customers.

Our business model is designed to generate margins primarily from our service charge to sellers, as well as adjacent products and services associated with a transaction.

We closely track the number of potential sellers who accept the Opendoor offer versus listing their home on the MLS.

This conversion rate is an important measure of the strength of our value proposition and driver of future growth.

Home acquisition and renovation

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We also generate buyer awareness through Opendoor signage for listed properties.

Efficiently turning our inventory, inclusive of repairing, listing, and reselling the home, is important to our financial performance, as we bear holding costs (including utilities, property taxes and insurance) and financing costs during our ownership period.

Efficiently turning our inventory, inclusive of repairing, listing, and

OPENDOOR TECHNOLOGIES INC.

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

(Tabular amounts in thousands, except share and per share data and ratios, or as noted)

reselling the home, is important to our financial performance, as we bear holding costs (including utilities, property taxes and insurance) and financing costs during our ownership period.

As part of the listing and marketing process, we determine an appropriate pricing strategy for each home.

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Expansion into New Markets

Since our inception in 2014, we have expanded into 39 markets as of June 30, 2021.

Since our inception in 2014, we have expanded into 44 markets as of September 30, 2021.

The following table represents the number of markets as of the periods presented:

June 30, March 31, Year Ended December 31,

September 30, June 30, March 31, Year Ended December 31,

(in whole numbers) 2021 2021 2021 2020 2019 2018

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We launched three additional markets in 2019 and did not launch any markets in 2020, primarily due to COVID-19.

We plan to double the markets we serve by the end of 2021 and have launched 18 new markets in the first half of the year.

We believe our centralized systems will allow for a higher velocity and lower cost market launch process in the future.

We are able to launch a market with only a small field team focused on home assessments and subcontractor oversight, with all other key functions managed centrally, including marketing, customer sales and support and pricing.

OPENDOOR TECHNOLOGIES INC.

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

(Tabular amounts in thousands, except share and per share data and ratios, or as noted)

We planned to double the markets we serve by the end of 2021 and have achieved that goal, having launched 23 new markets in the first nine months of the year.

We believe our centralized systems allow for a higher velocity and lower cost market launch process.

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, including marketing, customer sales and support and pricing.

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.

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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, listing and real estate brokerage services, and mortgage services.

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 Home Loans.

We believe that vertically integrating services that are adjacent to the core real estate transaction will allow us to deliver a superior, seamless experience to the consumer.

Our success with title insurance services helps validate our thesis that customers prefer an online, integrated experience.

Our success with title insurance services helps validate our view that

OPENDOOR TECHNOLOGIES INC.

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

(Tabular amounts in thousands, except share and per share data and ratios, or as noted)

customers prefer an online, integrated experience.

We expect that these adjacent services will also be accretive to our Contribution Margin.

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Moreover, residential real estate prices tend to move gradually relative to other asset classes, which meaningfully reduces our exposure to price fluctuations during our ownership period.

OPENDOOR TECHNOLOGIES INC.

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

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• Our pricing models and inventory management systems are designed to recalibrate to market signals on a daily basis.

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In addition, we employ sophisticated resale pricing management systems that allow as to optimize sell-through and margin using real-time, local market demand information, including down to an individual home level.

We believe that the quality and scale of information we utilize in our inventory management decisions provides us with a structural advantage over individual sellers or agents in the traditional home selling process.

We believe that the quality and scale of information we utilize in our inventory management decisions, and our ability to manage these decisions across a scaled, diversified portfolio, provides us with a structural advantage over individual sellers or agents in the traditional home selling process.

• At any moment in time, a significant portion of our inventory is under resale contract;

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This further limits our exposure to the remaining homes in inventory.

• Our listed homes are not occupied and are in resale condition given the repairs and renovations we perform.

We believe that this increases the salability and liquidity of our portfolio.

• Our listed homes are not occupied and are in sale-ready condition given the repairs and renovations we perform.

We believe that this increases the attractiveness and liquidity of our portfolio.

• Our operations across 44 markets and multiple price and home types allow us to benefit from significant diversification effects.

Individual buyers and sellers or local operators are exposed to price and behavioral effects that are associated with specific markets or home segments.

Our scale and diverse coverage allow us to mitigate such exposures across a wider range of markets and home segments so that our overall risk per home decreases as we increase the breadth of markets, price points and home types that we operate in.

Individual buyers and sellers or local operators are exposed to price and behavioral effects

OPENDOOR TECHNOLOGIES INC.

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

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that are associated with specific markets or home segments.

We will continue to make substantial investments in our pricing systems and risk management functions.

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Our business model is working capital intensive and inventory financing is a key enabler of our growth.

We rely on our access to non-recourse asset-backed financing facilities, which consist of senior credit facilities and asset-backed mezzanine term debt facilities, to finance our home acquisitions.

We rely on our access to non-recourse asset-backed debt, which consist of senior credit 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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Contribution Profit provides investors a measure to assess Opendoor’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 interest costs attributable to homes sold during a reporting period.

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.

OPENDOOR TECHNOLOGIES INC.

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

(Tabular amounts in thousands, except share and per share data and ratios, or as noted)

Adjusted Gross Profit, Contribution Profit and Contribution Profit After Interest are supplemental measures of our operating performance and have limitations as analytical tools.

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We define Adjusted Gross Margin as Adjusted Gross Profit as a percentage of revenue.

OPENDOOR TECHNOLOGIES INC.

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

(Tabular amounts in thousands, except share and per share data and ratios, or as noted)

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.

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See “— Liquidity and Capital Resources — Debt and Financing Arrangements.

” We do not include interest expense associated with our mezzanine term debt facilities in this calculation as we do not view such facilities as reflective of our expected long term capital structure and cost of financing.

” We do not include interest expense associated with our mezzanine debt facilities in this calculation.

We use a mix of debt and equity capital to finance our inventory and that mix will vary over time.

In addition, we expect to continue to evolve our cost of financing as we include other debt sources beyond mezzanine capital.

As such, we do not view our current mezzanine interest expense to be reflective of our long-term cost of financing.

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 fully burdened with expected long-term costs of financing.

Contribution Profit After Interest helps management assess Contribution Margin performance, per above, when burdened with senior cost of financing.

OPENDOOR TECHNOLOGIES INC.

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in thousands, except percentages) 2021 2020 2021 2020

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Restructuring in cost of revenue (3)

— 1,901 — 1,901

Adjusted Gross Profit $ 233,779 $ 33,073 $ 490,491 $ 173,046

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See “— Liquidity and Capital Resources — Debt and Financing Arrangements .”

(9) Represents the interest expense under our senior credit facilities incurred on homes sold for the current period during the period.

(10) Represents the interest expense under our senior credit facilities incurred on homes sold for the current period during prior periods.

(9) Represents the interest expense under our senior credit facilities incurred on homes sold in the current period during the period.

(10) Represents the interest expense under our senior credit facilities incurred on homes sold in the current period during prior periods.

OPENDOOR TECHNOLOGIES INC.

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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.

Adjusted Net Loss and Adjusted EBITDA

We also present Adjusted Net 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.

Adjusted Net 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.

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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, derivative and warrant fair value adjustment, intangible amortization, and payroll tax on initial RSU release.

Adjusted Net Loss

We calculate Adjusted Net Loss as GAAP net loss adjusted to exclude non-cash expenses of stock-based compensation, marketable equity securities fair value adjustment, derivative and warrant fair value adjustment, intangible amortization, and payroll tax on initial RSU release.

It also excludes non-recurring restructuring charges, gain on lease termination, and convertible note payment-in-kind (“PIK”) interest and issuance discount amortization.

Adjusted Net Income (Loss) also aligns the timing of impairment charges 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 Net Loss also aligns the timing of impairment charges 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 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.

We calculated Adjusted EBITDA as Adjusted Net 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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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:

The following table presents a reconciliation of our Adjusted Net Loss and Adjusted EBITDA to our net loss, which is the most directly comparable GAAP measure, for the periods indicated:

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in thousands, except percentages) 2021 2020 2021 2020

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Stock-based compensation 62,011 2,523 465,059 9,162

Marketable equity securities fair value adjustment (1)

(51,013) — (51,013) —

Derivative and warrant fair value adjustment (1)

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(248) (322) (647) (367)

Adjusted Net Income (Loss) $ 2,475 $ (41,506) $ (18,326) $ (97,300)

Adjusted Net Loss $ (17,273) $ (36,443) $ (35,599) $ (133,743)

Depreciation and amortization, excluding amortization of intangibles and right of use assets

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________________

(1) Represents the gains and losses on our warrant liabilities, which are marked to fair value at the end of each period.

(1) Represents the gains and losses on our financial instruments, which are marked to fair value at the end of each period.

(2) Represents amortization of intangibles acquired in the OSN and Open Listings acquisitions which contribute to revenue generation and are recorded as part of purchase accounting.

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In 2020, these costs related mainly to a reduction in workforce implemented in April 2020 as well as our exercise of the early termination option related to our San Francisco headquarters.

(6) Includes non-cash payment-in-kind (“PIK”) interest and amortization of the discount on the convertible notes issued from July through November 2019.

We exclude convertible note PIK interest and amortization from Adjusted Net Income (Loss) since these are non-cash in nature and were converted into equity in September 2020 when the Company entered into the Convertible Notes Exchange Agreement with the convertible note holders.

(7) Includes primarily gain or loss on disposal of fixed assets, gain or loss on interest rate lock commitments, gain or loss on the sale of marketable securities, and sublease income.

(6) Includes non-cash payment-in-kind (“PIK”) interest and amortization of the discount on the convertible notes issued from July through November 2019 (the “2019 Convertible Notes”).

We exclude convertible note PIK interest and amortization from Adjusted Net Loss since these are non-cash in nature and were converted into equity in September 2020 when the Company entered into the Convertible Notes Exchange Agreement with the convertible note holders.

OPENDOOR TECHNOLOGIES INC.

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(Tabular amounts in thousands, except share and per share data and ratios, or as noted)

(7) Includes primarily gain or loss on disposal of fixed assets, gain or loss on interest rate lock commitments, gain or loss on the sale of available for sale securities, and sublease income.

(8) Includes interest expense on our asset-backed debt facilities.

(9) Includes amortization of debt issuance costs and loan origination fees, commitment fees, unused fees, and other interest related costs on our asset-backed debt facilities.

(9) Includes amortization of debt issuance costs and loan origination fees, commitment fees, unused fees, other interest related costs on our asset-backed debt facilities, and interest expense incurred on the 2026 convertible senior notes outstanding.

(10) Consists mainly of interest earned on cash, cash equivalents and marketable securities.

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We generate revenue primarily 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 with Opendoor, List with Opendoor and Opendoor Home Loans.

Due to the pause in home purchases following the outbreak of the COVID-19 pandemic, our inventory levels began to meaningfully decline in March 2020.

We experienced sequential, quarter-over-quarter declines in revenue in the second, third, and fourth quarters of 2020.

We resumed operations in all markets in August 2020 and have been actively rebuilding our inventory, leading to sequential growth in balances for the fourth quarter of 2020 and the first two quarters of 2021.

Likewise, we returned to sequential revenue growth in the first quarter of 2021 and expect this trend to continue for the remainder of the year.

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.

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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.

Other Operating Expenses

Operating Expenses

Sales, Marketing and Operations Expense

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We incurred a significant increase in stock-based compensation in the first half of 2021 as a result of certain performance-based awards and historical RSUs satisfying their liquidity event vesting conditions.

The increase in stock-based compensation impacts each line item within Other operating expenses.

We expect stock based compensation to decline beginning in the third quarter of 2021 given that a majority of the expense related to certain performance-based awards has been recognized as of June 30, 2021.

The increase in stock-based compensation impacts each line item within Operating expenses.

Stock-based compensation declined in the third quarter of 2021 given that a majority of the expense related to certain performance-based awards was recognized as of June 30, 2021.

See “ Part I – Item 1.

Financial Statements – Notes to Condensed Consolidated Financial Statements – Note 12.

Share-based awards."

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,

OPENDOOR TECHNOLOGIES INC.

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Technology and Development Expense

websites, tools and applications that support our products.

Technology and development expense also includes amortization of capitalized software development costs.

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We expect our overall interest expense to increase as inventory increases.

Subject to market interest rate drivers, we will evaluate opportunities to reduce our borrowing costs over the long-term, including through limiting our reliance on the higher cost mezzanine term debt facilities and exploring new sources of financing.

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 interest income from our investment in marketable securities.

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 debt securities.

Income Tax Expense

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Three Months Ended

June 30, Change in

September 30, Change in

(in thousands, except percentages) 2021 2020 $ %

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N/M - Not meaningful.

Six Months Ended

June 30, Change in

Nine Months Ended

September 30, Change in

(in thousands, except percentages) 2021 2020 $ %

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N/M - Not meaningful.

Revenue increased by $445.6 million, or 60%, for the three months ended June 30, 2021 compared to the three months ended June 30, 2020.

Revenue increased by $1,927.7 million, or 569%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020.

The increase in revenue was primarily attributable to higher sales volumes, driven by our efforts to rebuild inventory, as well as higher average revenue per home.

We sold 3,481 homes during the three months ended June 30, 2021, compared to 2,924 homes during the three months ended June 30, 2020, representing an increase of 19%, while revenue per home sold increased 35% between periods.

Average resale prices were positively impacted by home price appreciation and buybox expansion.

We sold 5,988 homes during the three months ended September 30, 2021, compared to 1,232 homes during the three months ended September 30, 2020, representing an increase of 386% and a revenue per home sold increase of 38% between periods.

Average resale prices were positively impacted by home price appreciation, buybox expansion, and intracity mix.

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Revenue decreased by $63.0 million, or 3%, for the six months ended June 30, 2021 compared to the six months ended June 30, 2020.

The decrease in revenue was primarily attributable to lower sales volumes in the first quarter of 2021 compared to the first quarter of 2020, reflecting the decline in inventory levels in response to the COVID-19 pandemic.

Revenue increased by $1,864.8 million, or 80%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

The increase in revenue was primarily attributable to higher sales volumes in the second and third quarters of 2021 compared to the corresponding quarters of 2020, as well as higher revenue per home.

The higher sales volumes are a reflection of our efforts to rebuild inventory beginning in August 2020, following our temporary pause in home purchases at the start of the COVID-19 pandemic.

See “— Business Impact of COVID-19 ”.

During the second quarter of 2021, we returned to pre-COVID inventory levels and revenue increased by $445.6 million or 60% for the three months ended June 30, 2021 compared to the three months ended June 30, 2020, reflecting higher sales volumes as well as higher revenue per home.

We sold 5,943 homes during the six months ended June 30, 2021, compared to 7,832 homes during the six months ended June 30, 2020, representing a decrease of 24%, while revenue per home sold increased 28% between periods.

We surpassed pre-COVID-19 inventory levels in the second quarter of 2021.

We sold 11,931 homes during the nine months ended September 30, 2021, compared to 9,064 homes during the nine months ended September 30, 2020, representing an increase of 32%, while revenue per home sold increased 37% between periods.

Average resale prices were positively impacted by home price appreciation and buybox expansion.

Cost of Revenue and Gross Profit

Cost of revenue increased by $341.4 million, or 50%, for the three months ended June 30, 2021 compared to the three months ended June 30, 2020.

This increase was primarily attributable to higher sales volumes and a 26% increase in cost of revenue per home as a result of inventory mix and buybox expansion.

Cost of revenue increased by $1,761.1 million, or 582%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020.

This increase was primarily attributable to higher sales volumes and a 40% 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 38% increase in revenue per home.

Cost of revenue decreased by $173.2 million, or 9%, for the six months ended June 30, 2021 compared to the six months ended June 30, 2020.

This decrease in cost of revenue was primarily attributable to lower sales volumes, offset by a 20% increase in cost of revenue per home as a result of inventory mix and buybox expansion.

Gross profit margin improved from 7.4% to 13.4% for the three months ended June 30, 2020 and June 30, 2021, respectively.

For the same periods, Adjusted Gross Margin improved from 6.9% to 13.5%.

Gross margin improvement was primarily due to a combination of healthy inventory mix, home price appreciation and the effectiveness of our inventory resale systems.

In addition, we saw gains in home renovation efficiency and margins associated with adjacent services.

Contribution Margin increased from 2.7% to 10.8% for the same periods, due largely to a higher Adjusted Gross Margin as well as improvements in direct selling and holding costs.

Cost of revenue increased by $1,587.8 million, or 74%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

This increase in cost of revenue was primarily attributable to higher sales volumes and a 32%increase in cost of revenue per home as a result of inventory mix, home price appreciation and buybox expansion.

Gross margin decreased from 10.6% to 8.9% for the three months ended September 30, 2020 and September 30, 2021, respectively.

The gross margin decrease was primarily due to the impact of $31.6 million of impairment recorded during the three months ended September 30, 2021 on homes that are in inventory as of September 30, 2021.

The gross margin decrease was partially offset by improvements in repair and renovation efficiency.

For the same periods, Adjusted Gross Margin improved from 9.8% to 10.3% and Contribution Margin increased from 5.9% to 7.5%, due to improvements in repair and renovation efficiency, as well as lower holding and selling costs.

See “— Non-GAAP Financial Measures .”

Gross profit margin improved from 7.3% to 13.2% for the six months ended June 30, 2020 and June 30, 2021, respectively.

Gross margin improved from 7.8% to 10.9% for the nine months ended September 30, 2020 and September 30, 2021, respectively.

For the same periods, Adjusted Gross Margin improved from 7.4% to 11.7%.

Gross margin improvement was primarily due to a combination of healthy inventory mix, home price appreciation and the effectiveness of our inventory resale systems.

In addition, we saw gains in home renovation efficiency and margins associated with adjacent services.

In addition, we saw improvements in repair and renovation efficiency.

Contribution Margin increased from 3.4% to 8.9% for the same periods, due largely to a higher Adjusted Gross Margin as well as improvements in direct selling and holding costs.

See “— Non-GAAP Financial Measures .

Other Operating Expenses

Operating Expenses

Sales, Marketing and Operations .

Sales, marketing and operations increased by $49.3 million, or 104%, for the three months ended June 30, 2021 compared to the three months ended June 30, 2020.

The increase was primarily attributable to a $33.4 million increase in advertising expense as we increased marketing in an effort to ramp up acquisition volumes in both existing and new markets.

In addition, property holding costs increased by $6.3 million consistent with increased inventory levels and headcount expenses, including salaries, benefits and stock-based compensation increased $6.3 million consistent with the increase in headcount.

Sales, marketing and operations increased by $36.6 million, or 28%, for the six months ended June 30, 2021 compared to the six months ended June 30, 2020.

The increase was primarily attributable to a $45.8 million increase in advertising expense as we increased marketing in an effort to ramp up acquisition volumes in both existing and new markets.

In addition, stock based compensation increased $7.5 million reflecting both an increase in headcount as well as the recognition of stock based compensation beginning in the first quarter of 2021 when the February 2021 Offering satisfied the liquidity event vesting condition of certain RSUs.

The increases were partially offset by a $13.6 million decrease in resale broker commissions due to lower sales volumes, lower broker commission rates, and a higher mix of institutional buyers.

In addition, severance costs decreased by $6.0 million as a result of the workforce restructuring in the second quarter of 2020.

General and Administrative .

General and administrative increased by $161.3 million, or 550%, for the three months ended June 30, 2021 compared to the three months ended June 30, 2020.

The increase was primarily attributable to $153.7 million of additional stock based compensation from the commencement of expense recognition of certain performance awards following

Sales, marketing and operations increased by $126.2 million, or 462%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020.

The increase was primarily attributable to a $29.4 million increase in advertising expense as we increased marketing to drive acquisition volumes in both existing and new markets.

Resale transaction costs and broker commissions increased $43.0 million, consistent with the 386%% increase in the number of homes sold.

Property holding costs increased by $30.4 million, consistent with increased inventory levels.

Headcount expenses, including salaries, benefits and stock-based compensation, increased $13.1 million consistent with the increase in headcount.

Sales, marketing and operations increased by $162.8 million, or 104%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

The increase was primarily attributable to a $75.3 million increase in advertising expense as we increased marketing to drive acquisition volumes in both existing and new markets launched in 2021, relative to the limited marketing spend in 2020 due to the onset of COVID-19.

In addition, stock-based compensation increased $9.1 million reflecting both an increase in headcount as well as the recognition of stock-based compensation beginning in the first quarter of 2021 when the February 2021 Offering (as defined herein) satisfied the liquidity event vesting condition of certain RSUs.

Resale transaction costs and broker commissions increased $28.7 million, consistent with the 32% increase in the number of homes sold.

Property holding costs increased by $32.1 million consistent with increased inventory levels.

Headcount expenses, including salaries and benefits increased $10.3 million consistent with the increase in headcount.

OPENDOOR TECHNOLOGIES INC.

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the consummation of the Business Combination in December 2020 as well as the expense recognition of certain restricted stock units ("RSUs") upon the fulfillment of the liquidity event vesting condition satisfied by the February 2021 Offering.

General and administrative increased by $353.8 million, or 601%, for the six months ended June 30, 2021 compared to the six months ended June 30, 2020.

General and Administrative .

General and administrative increased by $49.9 million, or 124%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020.

The increase was primarily attributable to $50.8 million of additional stock-based compensation from the commencement of expense recognition of certain performance awards following the consummation of the Business Combination (as defined herein) in December 2020 as well as the expense recognition of certain restricted stock units ("RSUs") upon the fulfillment of the liquidity event vesting condition satisfied by the February 2021 Offering.

General and administrative increased by $403.7 million, or 407%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

The increase was primarily attributable to $399.9 million of additional stock-based compensation from the commencement of expense recognition of certain performance awards following the consummation of the Business Combination in December 2020 as well as the expense recognition of certain RSUs upon the fulfillment of the liquidity event vesting condition satisfied by the February 2021 Offering.

Technology and Development .

Technology and development increased by $7.6 million, or 45%, for the three months ended June 30, 2021 compared to the three months ended June 30, 2020.

Technology and development increased by $14.1 million, or 107%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020.

The increase was primarily attributable to a $7.2 million increase in stock-based compensation reflecting both an increase in headcount as well as the recognition of stock-based compensation beginning in the first quarter of 2021 when the February 2021 Offering satisfied the liquidity event vesting condition of certain RSUs.

Technology and development increased by $42.4 million, or 130%, for the six months ended June 30, 2021 compared to the six months ended June 30, 2020.

Technology and development increased by $56.6 million, or 123%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

The increase was primarily attributable to a $46.9 million increase in stock-based compensation reflecting both an increase in headcount as well as the recognition of stock-based compensation beginning in the first quarter of 2021 when the February 2021 Offering satisfied the liquidity event vesting condition of certain RSUs.

Derivative and Warrant Fair Value Adjustment

Derivative and warrant fair value adjustment increased by $23.8 million for the three months ended June 30, 2021 compared to the three months ended June 30, 2020.

The gain for the three months ended June 30, 2021 was attributable to a decrease in the fair value of the Sponsor Warrants of $24.0 million which is primarily attributable to the decline in the Company's stock price over this period.

In June 2021, we announced the redemption of all outstanding warrants to purchase shares of the Company’s common stock on July 9, 2021.

Derivative and warrant fair value adjustment increased by $9.6 million for the six months ended June 30, 2021 compared to the six months ended June 30, 2020.

The gain for the six months ended June 30, 2021 was primarily attributable to a decrease in the fair value of the Sponsor Warrants of $8.7 million which is primarily attributable to the decline in the Company's stock price over this period.

In June 2021, we announced the redemption of all outstanding warrants to purchase shares of the Company’s common stock on July 9, 2021.

Derivative and warrant fair value adjustment increased by $27.8 million for the three months ended September 30, 2021 compared to the three months ended September 30, 2020.

The expense recorded for the three months ended September 30, 2020 was primarily attributable to a $23.3 million increase in the fair value of the derivative liability in extinguishment of the Company's 2019 Convertible Notes.

The gain recorded for the three months ended September 30, 2021 is attributable to a decrease in the fair value of the Sponsor Warrants of $3.5 million, which is primarily attributable to the decline in the Company's stock price over this period.

Derivative and warrant fair value adjustment increased by $37.4 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

The expense recorded for the nine months ended September 30, 2020 was primarily attributable to a $23.3 million increase in the fair value of the derivative liability in extinguishment of the Company's 2019 Convertible Notes.

The gain for the nine months ended September 30, 2021 was primarily attributable to a decrease in the fair value of the Sponsor Warrants of $12.2 million which is primarily attributable to the decline in the Company's stock price over this period.

Interest Expense

Interest expense decreased by a nominal amount for the three months ended June 30, 2021 compared to the three months ended June 30, 2020.

Interest expense decreased by $18.2 million, or 40%, for the six months ended June 30, 2021 compared to the six months ended June 30, 2020.

The decrease was primarily attributable to a 19% decrease in the average outstanding balance of our higher interest bearing mezzanine term loans and lower interest rates on our senior credit facilities, partially offset by a 16% increase in the average outstanding balance of our senior credit facilities due to the increase in inventory levels.

The decrease in interest expense is also due to the elimination of interest expense related to the Convertible Notes which were converted into equity in September 2020.

Other Income — Net

Other income – net increased by a nominal amount for the three months ended June 30, 2021 compared to the three months ended June 30, 2020.

Other income – net decreased by a nominal amount for the six months ended June 30, 2021 compared to the six months ended June 30, 2020.

Interest expense increased by $31.2 million, or 252%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020.

The increase was primarily attributable to increases in the average outstanding balance of our asset-backed senior credit facilities and mezzanine term debt facilities, which is consistent with our increase in inventory over the same periods.

Interest expense increased by $13.0 million, or 23%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

The increase was primarily attributable to increases in the average outstanding balances of our asset-backed senior credit facilities and mezzanine term debt facilities, which is consistent with our increase in inventory over the same periods.

The increase in interest expense from our asset backed credit facilities is partially offset by a $7.8

OPENDOOR TECHNOLOGIES INC.

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million decrease in interest expense and amortization of debt issuance costs related to the 2019 Convertible Notes, which were converted into equity in September 2020.

Other Income — Net

Other income – net increased by $51.2 million and $50.0 million for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 and the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, respectively.

The increase is primarily related to the $51.0 million fair value adjustment on marketable equity securities recorded in the third quarter of 2021 when a company in which we invested went public.

Income Tax Expense

Income tax expense increased by a nominal amount for the three and six months ended June 30, 2021 compared to the three and six months ended June 30, 2020.

Income tax expense increased by a nominal amount for the three and nine months ended September 30, 2021 compared to the three and nine months ended September 30, 2020.

Liquidity and Capital Resources

Our principal sources of liquidity have historically consisted of cash generated from our operations and from financing activities.

As of June 30, 2021, we had cash and cash equivalents of $1,557.8 million, marketable securities of $200.1 million and total outstanding balances on our credit facilities and other secured borrowings of $2,289.9 million.

As of September 30, 2021, we had cash and cash equivalents of $1,358.8 million, restricted cash of $484.5 million, marketable securities of $481.1 million, and total outstanding balances on our asset-backed debt and other secured borrowings of $5,443.5 million.

In addition, we had undrawn borrowing capacity of $930.2 million under our asset-backed senior credit facilities (as described further below), of which $101.8 million is fully committed.

We have incurred losses from inception through June 30, 2021 and expect to incur additional losses for the foreseeable future.

Our ability to service our debt, fund working capital, capital expenditures and business development efforts 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.

In August 2021, we issued convertible senior notes with an aggregate principal amount of $977.5 million.

On December 18, 2020, we consummated a merger with Social Capital Hedosophia Holdings Corp.

II, (“SCH”), a special purpose acquisition company, which resulted in Opendoor Labs Inc.

becoming a wholly owned subsidiary of SCH and the subsequent renaming of SCH to Opendoor Technologies Inc.

(the "Business Combination").

The Business Combination had a significant impact on our reported financial position and in particular a net increase in cash of $970 million.

The increases in cash includes approximately $600 million in proceeds from the private placement ("PIPE Investment") consummated simultaneously with the Business Combination.

See “ Part I – Item 1.

Financial Statements – Notes to Condensed Consolidated Financial Statements – Note 2.

Business Combination ” for more information.

We received aggregate net proceeds from the February 2021 Offering of approximately $859.5 million after deducting underwriting discounts and commissions and offering expenses payable by us.

We have incurred losses from inception through September 30, 2021 and expect to incur additional losses for the foreseeable 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 our working capital requirements to continue to increase in the immediate future, as we seek to increase our inventory and expand into more markets across the United States.

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.

The discussion below does not include transactions that occurred subsequent to June 30, 2021.

The discussion below does not include transactions that occurred subsequent to September 30, 2021.

See “ Part I – Item 1.

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Subsequent Events ” for additional information regarding transactions subsequent to the balance sheet date.

OPENDOOR TECHNOLOGIES INC.

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

(Tabular amounts in thousands, except share and per share data and ratios, or as noted)

Debt and Financing Arrangements

Our financing activities include short-term borrowing under our asset-backed senior revolving credit facilities, the issuance of long-term asset-backed senior and mezzanine term debt, borrowing under our mortgage repurchase financing, 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 financing facilities, consisting of asset-backed senior credit facilities and asset-backed mezzanine debt facilities to provide financing for our real estate inventory purchases and renovations.

We primarily use non-recourse asset-backed debt, consisting of asset-backed senior credit facilities and asset-backed mezzanine 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 assurances 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 seen improved terms and an increase in our borrowing capacity over the last two years.

We actively manage our relationships with multiple financial institutions and seek to optimize duration, flexibility, efficiency and cost of funds.

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Our real estate-owning subsidiaries’ assets and credit generally are not available to satisfy the debts and other obligations of any other Opendoor entities except to the extent other Opendoor entities are also a party to the relevant financing arrangements.

Our asset-backed financing facilities are non-recourse to Opendoor except for limited guarantees provided by an Opendoor subsidiary for certain obligations in situations involving “bad acts” by an Opendoor entity and certain other limited circumstances that are generally under our control.

Our asset-backed debt is non-recourse to Opendoor except for limited guarantees provided by an Opendoor subsidiary for certain obligations in situations involving “bad acts” by an Opendoor entity and certain other limited circumstances that are generally under our control.

Our senior credit 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.

OPENDOOR TECHNOLOGIES INC.

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(Tabular amounts in thousands, except share and per share data and ratios, or as noted)

Our senior credit facilities generally advance 80% to 90% of 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.

Asset-backed Senior Credit Facilities

The table below summarizes our asset-backed senior credit facilities as of June 30, 2021:

June 30, 2021 Borrowing

The following table summarizes certain details related to our non-recourse asset-backed debt and other secured borrowings as of September 30, 2021(in thousands, except interest rates):

Outstanding Amount

September 30, 2021 Borrowing

Current Non-Current Weighted

Interest Rate

End of Revolving / Withdrawal Period

Final Maturity

Non-Recourse Asset-Backed Debt:

Asset-Backed Senior Credit Facilities

Revolving Facility 2018-2 $ 1,000,000 $ 999,206 $ — 2.84 % September 23, 2022 December 23, 2022

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Revolving Facility 2019-3 925,000 627,938 — 3.25 % August 22, 2022 August 21, 2023

Revolving Facility 2021-1 125,000 112,096 — 2.15 % October 31, 2022 October 31, 2022

Term Debt Facility 2021-S1 400,000 — 250,000 3.48 % April 1, 2024 April 1, 2025

Term Debt Facility 2021-S2 600,000 — 500,000 3.20 % September 10, 2024 September 10, 2025

Total $ 5,730,000 $ 4,049,812 $ 750,000

In some cases, the undrawn borrowing capacity amounts under the asset-backed senior 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 of June 30, 2021, the Company had fully committed borrowing capacity with respect to asset-backed senior credit facilities of $2,057.7 million The total outstanding amount presented above includes $1,666.5 million of current liabilities and $150.0 million of non-current liabilities;

the carrying value of the non-current liabilities is reduced by issuance costs of $267 thousand.

The revolving or 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 credit facilities also have additional extension options that are subject to lender approval that are not reflected in the table above.

Historically, we have had success in renewing these facilities to the extent we have wished to do so.

Issuance Costs (3,234)

Carrying Value $ 746,766

Asset-Backed Mezzanine Term Debt Facilities

In addition to the asset-backed senior credit facilities, we have issued asset-backed mezzanine term debt facilities which are subordinated to the related senior facilities.

The table below summarizes our asset-backed mezzanine term debt facilities as of June 30, 2021:

June 30, 2021 Borrowing

Term Debt Facility 2016-M1 $ 324,000 $ — $ 324,000 10.00 % October 31, 2023 March 31, 2025

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Carrying Value $ 621,223

Total Non-Recourse Asset-Backed Debt $ 6,354,000 $ 4,049,812 $ 1,367,989

Recourse Debt - Other Secured Borrowings:

Mortgage Financing

Repo Facility 2019-R1 $ 100,000 $ 19,728 $ — 1.84 % May 26, 2022 May 26, 2022

Total Recourse Debt $ 100,000 $ 19,728 $ —

Asset-backed Senior Credit Facilities

As of September 30, 2021, the Company had fully committed borrowing capacity with respect to asset-backed senior credit facilities of $3,837.4 million The total outstanding amount presented above includes $4,049.8 million of current liabilities and $750.0 million of non-current liabilities;

the carrying value of the non-current liabilities is reduced by issuance costs of $3.2 million.

The revolving or 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 credit facilities also have additional extension options that are subject to lender approval that are not reflected in the table above.

Historically, we have had success in renewing these facilities to the extent we have wished to do so.

Asset-Backed Mezzanine Term Debt Facilities

In addition to the asset-backed senior credit facilities, we have issued asset-backed mezzanine term debt facilities which are subordinated to the related senior facilities.

See “ Part I – Item 1.

Financial Statements – Notes to Condensed Consolidated Financial Statements – Note 7.

Credit Facilities and Long-Term Debt ” for additional information regarding our non-recourse asset-backed financing facilities.

Financial Statements – Notes to Condensed Consolidated

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Financial Statements – Note 7.

Credit Facilities and Long-Term Debt ” for additional information regarding our non-recourse asset-backed debt.

Mortgage Financing

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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.

The following table summarizes certain details related to our mortgage financing (in thousands, except interest rates):

June 30, 2021 Borrowing

Weighted Average Interest Rate End of Revolving Period Final

Repo Facility 2019-R1 $ 50,000 $ 24,355 1.85 % May 26, 2022 May 26, 2022

See “ Part I – Item 1.

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Credit Facilities and Long-Term Debt ” for additional information regarding our master repurchase agreement.

Convertible Senior Notes

In August 2021, the Company issued 0.25% senior senior notes due in 2026 (the "2026 Notes") with an aggregate principal amount of $977.5 million.

The tables below summarizes certain details related to our convertible senior notes:

September 30, 2021 Aggregate Principal Amount

Unamortized Debt Issuance Costs Net Carrying Amount

2026 Notes $ 977,500 $ (25,085) $ 952,415

See “ Part I – Item 1.

Financial Statements – Notes to Condensed Consolidated Financial Statements – Note 7.

Credit Facilities and Long-Term Debt ” for additional information regarding our convertible senior notes, including conversion rate, conversion and redemption dates, and the related capped call transaction.

The following table summarizes our cash flows for the periods presented:

Six Months Ended

Nine Months Ended

September 30,

(in thousands) 2021 2020

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Net Cash (Used in) Provided by Operating Activities

Net cash (used in) provided by operating activities was $(2,312.1) million and $950.3 million for the six months ended June 30, 2021 and 2020, respectively.

For the six months ended June 30, 2021, cash used in operating activities was primarily driven by the $2,249.5 million increase in inventory and a $31.4 million increase in escrow receivables correlated to the increase in revenue during the first half of 2021.

For the six months ended June 30, 2020, net cash provided by operating activities was primarily driven by a $1,035.1 million decrease in inventory, as we substantially paused purchasing additional homes in March 2020 in response to the COVID-19 pandemic and the consequent health risks.

Net cash (used in) provided by operating activities was $(5,903.6) million and $1,037.4 million for the nine months ended September 30, 2021 and 2020, respectively.

For the nine months ended September 30, 2021, cash used in operating activities was primarily driven by the $5,805.8 million increase in inventory and a $119.9 million increase in escrow receivables correlated to the increase in revenue during the first nine months of 2021.

For the nine months ended September 30, 2020, net cash provided by operating activities was primarily driven by a $1,146.8 million decrease in inventory, as we substantially paused purchasing additional homes in March 2020 in response to the COVID-19 pandemic and the consequent health risks.

The impact of the change in operating working capital was partially offset by our net loss, net of non-cash items, of $100.8 million.

Net Cash Used in Investing Activities

Net cash used in investing activities was $174.0 million and $68.9 million for the six months ended June 30, 2021 and 2020, respectively.

For the six months ended June 30, 2021, cash used in investing activities primarily consisted of the $152.8 million increase in marketable securities and the $10.0 million purchase of a strategic investment in a privately held company.

For the six months ended June 30, 2020, cash used in investing activities primarily consisted of the $58.2 million increase in marketable securities.

Net Cash Provided by (Used in) Financing Activities

Net cash provided by (used in) financing activities was $2,670.1 million and $(900.5) million for the six months ended June 30, 2021 and 2020, respectively.

For the six months ended June 30, 2021, cash provided by financing activities was primarily attributable to $1,803.6 million net proceeds from our asset-backed debt facilities and $886.1 million in proceeds from the February 2021 Offering, net of $28.9 million of issuance costs.

For the six months ended June 30, 2020, cash used in financing activities was primarily attributable to the net repayment of $898.8 million to our asset-backed debt facilities as we reduced inventory levels in response to COVID-19.

Net cash used in investing activities was $431.8 million and $50.8 million for the nine months ended September 30, 2021 and 2020, respectively.

For the nine months ended September 30, 2021, cash used in investing activities primarily consisted of the $372.9 million increase in marketable securities, $20.1 million for the purchase of Pro.com, net of cash acquired, and the $15.1 million purchase of strategic investments in certain privately held companies.

For the nine months ended September 30, 2020, cash used in investing activities primarily consisted of the $38.8 million increase in marketable securities.

In addition, we

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used $12.1 million for capital expenditures, including internally developed software, employee computers and leasehold improvements.

Net Cash Provided by (Used in) Financing Activities

Net cash provided by (used in) financing activities was $6,673.1 million and $(1,027.8) million for the nine months ended September 30, 2021 and 2020, respectively.

For the nine months ended September 30, 2021, cash provided by financing activities was primarily attributable to $4,944.6 million net proceeds from asset-backed debt and $886.1 million in proceeds from the February 2021 Offering, net of $28.9 million of issuance costs.

In addition, we received $977.5 million in proceeds from the issuance of the 2026 Notes, net of $24.4 million of issuance costs and offset by the $118.8 million purchase of the Capped Calls related to the 2026 Notes.

For the nine months ended September 30, 2020, cash used in financing activities was primarily attributable to the net repayment of $1,037.1 million to our asset-backed debt facilities as we reduced inventory levels in response to COVID-19.

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 ended December 31, 2020, except for the categories of contractual obligations included in the table below, which have been updated to reflect our contractual obligations as of June 30, 2021:

Payment Due by Year

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1,710,572 87,085 174,170 1,449,317 —

Convertible senior notes (3)

989,692 2,417 4,888 982,387

Mortgage financing (4)

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______________

(1) Represents the principal amounts outstanding as of June 30, 2021.

(1) Represents the principal amounts outstanding as of September 30, 2021.

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 of June 30, 2021.

(2) Represents the principal amounts outstanding as of June 30, 2021 and interest payments assuming the principal balances remain outstanding until maturity.

The payment is expected to be within one year of September 30, 2021.

(2) Represents the principal amounts outstanding as of September 30, 2021 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 of June 30, 2021.

(3) Represents the principal amounts outstanding as of September 30, 2021 and interest payments assuming the principal balances remain outstanding until maturity.

(4) Represents the principal amounts outstanding as of September 30, 2021.

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 June 30, 2021, we were under contract to purchase 8,158 homes for an aggregate purchase price of $2,962.3 million.

(5) As of September 30, 2021, we were under contract to purchase 6,231 homes for an aggregate purchase price of $2,259.9 million.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of June 30, 2021.

We did not have any off-balance sheet arrangements as of September 30, 2021.

OPENDOOR TECHNOLOGIES INC.

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

(Tabular amounts in thousands, except share and per share data and ratios, or as noted)

Critical Accounting Policies and Estimates

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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 2021, except as noted below.

There have been no significant changes to these critical accounting estimates during the first nine months of 2021, except as noted below.

In addition, we have other key accounting policies and estimates that are described in “ Part I – Item 1.

1 unchanged sentence

Description of Business and Accounting Policies ” in this Quarterly Report on Form 10-Q.

OPENDOOR TECHNOLOGIES INC.

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

(Tabular amounts in thousands, except share and per share data and ratios, or as noted)

Public and Sponsor Warrants

10 unchanged sentences

Since the holder of the instrument is not an input to a standard option pricing model, a consideration with respect to the indexation guidance, a change in the holder for the Sponsor Warrants impacting their value means the Sponsor Warrants are not indexed to the Company’s own stock.

Since the Private Warrants meet the definition of a derivative under ASC 815, we recorded these warrants as liabilities on the balance sheet at fair value upon the consummation of the Business Combination, with subsequent changes in their respective fair values recognized in the condensed consolidated statement of operations at each reporting period.

Since the Sponsor Warrants meet the definition of a derivative under ASC 815, we recorded these warrants as liabilities on the balance sheet at fair value upon the consummation of the Business Combination, with subsequent changes in their respective fair values recognized in the condensed consolidated statement of operations at each reporting period.

The Company concluded that the Public Warrants, which do not have the same exercise and settlement features as the Sponsor Warrants, meet the criteria to be classified in shareholders' equity.

The Public Warrants are publicly traded and thus had an observable market price .

As of June 30, 2021, following the Company providing notice of redemption with respect to the Public Warrants and the Sponsor Warrants on June 9, 2021, the Company valued the Sponsor Warrants based upon their settlement value.

On July 9, 2021, the Company completed the redemption of all of its outstanding Public and Sponsor Warrants and in connection with the redemption, the Public Warrants stopped trading on the Nasdaq Global Select Market.

Recent Accounting Pronouncements

4 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis