What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-02-24 compared with 2021-03-04 · 342 added, 391 removed, 335 unchanged (69% of the section changed)

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The discussion should be read together with the historical audited annual consolidated financial statements as of December 31, 2021 and 2020 and for the years ended December 31, 2021, 2020, and 2019.

As discussed in Note 1 to the accompanying consolidated financial statements the Company corrected the 2020 consolidated financial statements to account for Sponsor Warrants as a liability on the Company’s balance sheet with subsequent changes in their value recognized in the Company’s consolidated statement of operations at each reporting date.

These corrections are reflected in the discussions.

See “Part II – Item 8.

Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 1.

Description of Business and Accounting Policies” for additional information.

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 “Risk Factors” or in other parts of this Annual Report on Form 10-K.

Opendoor’s mission is to empower everyone with the freedom to move.

Since our inception in 2014, we have reimagined the residential real estate transaction to provide a new, radically simple way to buy and sell a home with more convenience, control and cost savings than ever before.

We believe our consumer-first orientation, scalable and integrated home transaction platform and our proprietary, machine learning-based pricing models are among our core advantages and differentiators for our business.

Collectively, these underpin Opendoor’s digital suite of services, which brings simplicity, certainty and speed to the home selling and buying process.

The Business Combination

We entered into the 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, which will require us to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices.

We 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 administrative resources.

We estimate that these incremental costs will be approximately $15 million per year.

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 140,000 transactions and expand our footprint to 44 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

Year Ended December 31,

(in millions, except percentages, homes sold, number of markets, and homes in inventory) 2021 2020 2019 2020 to 2021 Change 2019 to 2020 Change

Revenue $ 8,021 $ 2,583 $ 4,741 $ 5,438 $ (2,158)

Homes sold 21,725 9,913 18,799 11,812 (8,886)

Gross profit $ 730 $ 220 $ 301 $ 510 $ (81)

Gross margin 9.1 % 8.5 % 6.4 %

Net loss $ (662) $ (253) $ (339) $ (409) $ 86

Adjusted Net Loss $ (116) $ (175) $ (327) $ 59 $ 152

Contribution Profit $ 525 $ 110 $ 92 $ 415 $ 18

Contribution Margin 6.5 % 4.3 % 1.9 %

Adjusted EBITDA $ 58 $ (98) $ (218) $ 156 $ 120

Adjusted EBITDA Margin 0.7 % (3.8) % (4.6) %

Number of markets (at period end) 44 21 21 23 —

Inventory (at period end) $ 6,096 $ 466 $ 1,312 $ 5,630 $ (846)

Homes in inventory (at period end) 17,009 1,826 5,572 15,183 (3,746)

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.

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.

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, we continued to sell down inventory at a healthy pace, leading to home inventory of $152 million as of September 30, 2020 compared to inventory of $1,312 million as of December 31, 2019.

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)

revenues are dependent on inventory levels available for sale, our near-term revenues have been 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 grew inventory in the fourth quarter of 2020 to $466 million as of December 31, 2020 and plan to continue rebuilding our inventory throughout 2021.

We currently expect to return to sequential quarterly revenue growth in the first quarter of 2021 and return to 2019 revenue levels on a run-rate basis as we exit 2021.

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

We also implemented a workforce restructuring and realignment in April 2020 to preserve operating flexibility, given that the duration and impact of COVID-19 on the housing market was highly uncertain during that period.

We expect to benefit from a lower run-rate cost base as the business grows from current levels.

We believe COVID-19 has accelerated the adoption of our digital services, as well as created additional tailwinds for housing as people work from home, explore less populated areas and pursue more space.

Our Business Model

Revenue and margin model

We acquire homes directly from individual sellers and resell those homes to buyers, including both individual consumers and institutional investors.

Upon acquiring a home, we typically make necessary renovations and repairs before listing it for sale on our website, our mobile app, Multiple Listing Services (“MLS”) and other online real estate portals.

Our average hold period for homes purchased since January 2019, from acquisition to resale, ranged from 70 to 110 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.

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.

Given the size of the opportunity in front of us, we plan to invest aggressively in the near term and appropriately balance trade-offs between growth and margin as we scale.

We generate demand for our services through organic awareness and word-of-mouth, paid media spend, and partnership channels such as our relationships with homebuilders and online portals.

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.

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.

Home acquisition and renovation

Once a seller has received and accepted our final purchase offer, we enable the seller to close the transaction on a flexible timeline.

This is a particularly important feature to sellers, as their home sale can accommodate other life events (including the purchase of their next home) and further differentiates our service from a traditional sale.

Depending on the condition of the home, we leverage our vetted contractor network within each market to complete required repairs and upgrades.

In response to the COVID-19 pandemic and the consequent health risks, we substantially paused 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 most of our homes in inventory at a healthy pace, leading to a low point in inventory of $152 million as of September 30, 2020 compared to $1.3 billion 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

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)

scopes are focused on high-return investments and ensuring the home is in market-ready condition.

We continuously refine and adjust our repair strategies based on our operating experience in markets and reviewing neighborhood-level resale outcomes.

Post-renovation, we market our homes across a wide variety of channels to generate buyer awareness and demand.

These include the Opendoor website and mobile app, local MLS and syndication across real estate portals.

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.

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

Our proprietary pricing engine helps automate many of these steps, including relevant adjustments over time.

We measure our inventory performance compared to local market trends, and our pricing models can incorporate granular, relative demand signals to optimize pricing and sell-through across the portfolio.

Our resale models, in conjunction with our pricing team, aim to maximize resale margin while maintaining appropriate transaction velocity and overall inventory health.

When we receive an acceptable offer on a given home, we enter into a resale contract.

Buyers will then typically conduct an inspection on the property, finalize their mortgage application process and ultimately take possession of the home upon closing of the transaction.

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

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 surpassed pre-COVID-19 inventory levels in the second quarter of 2021 and ended the year with inventory of $6.1 billion as of December 31, 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

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Residential real estate is one of the largest consumer markets, with approximately $2.3 trillion of home value transacted annually.

In 2020, we estimate that we captured approximately 0.8% unit market share across our 21 markets, compared to 1.7% unit share in 2019, with the lower share volume attributable to the COVID-induced pause in home acquisitions and inventory sell down undertaken in 2020.

Given 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.

We have already demonstrated higher market share in a number of our more mature markets, providing a template for potential share gains as the rest of the portfolio matures.

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.

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Expansion into New Markets

Since our inception in 2014, we have expanded into 21 markets as of December 31, 2020.

We have expanded into 44 markets as of December 31, 2021.

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

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Number of markets (at period end) 44 21 21

Through the end of 2020, our markets covered approximately 1.3 million of the total 5.6 million existing home transactions that occur each year in the United States.

As such, we believe there is a meaningful opportunity to grow our business by expanding our geographic coverage.

Based on our markets launched to date, we believe our business model and pricing capabilities allow us to service the majority of our total addressable market.

After launching 12 markets in 2018, we focused on centralizing our operations platform in 2019 for long-term scalability.

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

We will resume additional market launches in 2021, with a plan to double the markets we serve by the end 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

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)

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.

We launched 23 new markets in 2021, exceeding our goal to double the markets we serve over the course of 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 purchase cohort Contribution Margins for new markets reach positive, steady-state levels approximately one year after initial launch.

The significant number of new market launches in 2018 contributed to our lower Contribution Margins in 2019;

as those same markets matured, we were able to improve Contribution Margin performance in 2020.

We expect to make substantial investments to support our market launches in 2021, which will impact both Contribution Margin and EBITDA as these new markets mature.

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 made substantial investments to support our market launches in 2021, which we expect will impact both Contribution Margin and Adjusted EBITDA as these new markets mature.

We expect such investments to continue as we launch additional markets.

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, 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, Opendoor Home Loans, and Opendoor Complete.

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.

I n the markets where our affiliates offer title insurance services, we provided title insurance services for over 80% of Opendoor home transactions that closed during 2020.

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

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

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.

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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)

Unit Economics

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Our long-term financial performance depends, in part, on continuing to expand unit margins through the following initiatives:

• Pricing engine optimization and enhancements, especially as we enter new markets and expand our reach in existing markets.

• 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.

• Successful introduction of additional services that supplement the core transaction margin profile.

The residential real estate market is seasonal, with greater demand from home buyers in the spring and summer, and typically weaker demand in late fall and winter.

We expect our financial results and working capital requirements to reflect seasonal variations over time, although our growth and market expansion have obscured the impact of seasonality in our historical financials and may continue to do so.

That said, we generally expect stronger sequential revenue growth in the first quarter of the year versus the third and fourth quarters.

Risk management

We have invested significant time and resources into our pricing engine and inventory management systems.

Our engineering, data science and pricing teams collectively focus on pricing accuracy for both home acquisition and disposition, as well as managing our inventory health across markets.

While residential real estate markets are subject to fluctuations, as with any market, we believe we are well-positioned to manage our inventory risk exposure due to the following:

• Our business model is based on transaction velocity and short-duration hold times, with our average days in possession typically ranging from 70 to 110 days for homes acquired since January 2019.

We have historically concentrated our home purchases on the more liquid segments of the residential real estate market, thus limiting our

OPENDOOR TECHNOLOGIES INC.

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

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duration risk.

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.

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

Accordingly, changing market conditions will be immediately reflected in our pricing for new acquisitions, leaving only previously-acquired inventory at risk to potential market volatility.

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

this means we have already found buyers for those homes and are in the process of closing the resale transactions.

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.

• We operate in 21 distinct markets as of December 31, 2020, affording us diversification across our inventory portfolio.

While there are macro forces that may impact all markets, local real estate markets tend to be idiosyncratic in terms of their individual supply-demand dynamics.

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

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 while balancing sell-through rates, holding periods, and portfolio aging.

Similarly, we evaluate our portfolio health metrics relative to the broader market (as observed on the 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 December 31, 2021, such homes represented 8% of our portfolio, compared to 24% 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".)

Inventory Financing

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 revolving credit facilities and asset-backed mezzanine term debt facilities, to finance our home acquisitions.

We primarily rely on our access to non-recourse asset-backed debt, which consist 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.

The residential real estate market is seasonal, with greater demand from home buyers in the spring and summer, and typically weaker demand in late fall and winter.

That said, we generally expect stronger sequential revenue growth in the first quarter of the year versus the third and fourth quarters.

Non-GAAP Financial Measures

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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 in our key markets.

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

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operating performance in our key markets.

Each of these measures is intended to present the economics related to homes sold during a given period.

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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.

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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.

These measures also exclude the impact of certain restructuring costs that are

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)

required under GAAP.

These measures also exclude the impact of certain restructuring costs that are required under GAAP.

Accordingly, these measures should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP.

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Adjusted Gross Profit / Margin

We calculate Adjusted Gross Profit as gross profit under GAAP adjusted for (1) inventory impairment in the current period, (2) inventory impairment in prior periods, plus (3) restructuring in cost of revenue.

We calculate Adjusted Gross Profit as gross profit under GAAP adjusted for (1) inventory valuation adjustment in the current period, (2) inventory valuation adjustment in prior periods, and (3) restructuring in cost of revenue.

Restructuring in cost of revenue reflects the costs associated with the reduction in our workforce in 2020, a portion of which were related to personnel included in cost of revenue.

Inventory impairment in the current period is calculated by adding back the inventory impairment charges recorded during the period on homes that remain in inventory at period end.

Inventory impairment in prior periods is calculated by subtracting the inventory impairment charges recorded in prior periods on homes sold in the current period.

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 Estimates and Policies — 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.

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Contribution Profit / Margin

We calculate Contribution Profit as Adjusted Gross Profit, minus (1) holding costs incurred in the current period on homes sold during the period, minus (2) holding costs incurred in prior periods on homes sold in the current period, and (3) direct selling costs incurred on homes sold during the current period.

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.

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Contribution Profit / Margin After Interest

We define Contribution Profit After Interest as Contribution Profit, minus interest expense under our senior revolving credit facilities incurred on the homes sold during the period.

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 senior revolving credit facilities are secured by our homes in inventory and drawdowns are made on a per-home basis at the time of purchase and are required to be repaid at the time the homes are sold.

Our asset-backed senior debt facilities are secured by our real estate inventory and cash.

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.

” 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.

In addition, 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 fully burdened with expected long-term costs of financing.

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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)

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

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.

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:

Year Ended December 31,

(in thousands, except percentages) 2020 2019 2018

(in millions, except percentages) 2021 2020 2019

Gross profit (GAAP) $ 730 $ 220 $ 301

Gross Margin 9.1 % 8.5 % 6.4 %

Inventory impairment – Current Period (1)

119 10,363 15,103

Inventory impairment – Prior Periods (2)

(10,544) (14,941) (2,419)

Inventory valuation adjustment – Current Period (1)(2)

Inventory valuation adjustment – Prior Periods (1)(3)

Restructuring in cost of revenue (4)

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________________

(1) Inventory impairment — Current Period is the inventory valuation adjustments recorded during the period presented associated with homes that remain in inventory at period end.

(2) Inventory impairment — Prior Periods is the inventory valuation adjustments recorded in prior periods associated with homes that sold in the period presented.

(3) Restructuring in cost of revenue consists mainly of severance and employee termination benefits that were recorded to cost of revenue.

On April 15, 2020, we carried out a reduction in workforce following the outbreak of the COVID-19 pandemic.

(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) Restructuring in cost of revenue consists mainly of severance and employee termination benefits that were recorded to cost of revenue due to a reduction in workforce in the second quarter of 2020 following the outbreak of the COVID-19 pandemic.

(5) 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, association dues, cleaning and maintenance costs.

(6) 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 Consolidated Statements of Operations.

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

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

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

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

(10) Represents the interest expense under our asset-backed senior debt facilities incurred during the period on homes sold in the current period.

(11) Represents the interest expense under our asset-backed senior debt facilities incurred during prior periods on homes sold in the current period.

Adjusted Net Loss and Adjusted EBITDA

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For example, these measures exclude the impact of certain costs required to be recorded under GAAP.

These measures also include impairment costs that were recorded in prior periods under GAAP and exclude, in connection with homes held in inventory at the end of the period, impairment costs required to be recorded under GAAP in the same period.

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.

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Adjusted Net Loss

We calculate Adjusted Net Loss as GAAP net loss adjusted to exclude non-cash expenses of stock-based compensation, derivative and warrant fair value adjustment and intangible amortization.

It also excludes non-recurring restructuring charges, loss on extinguishment of debt, and convertible note payment-in-kind (“PIK”) interest and issuance discount amortization.

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.

We calculate Adjusted Net Loss as GAAP net loss adjusted to exclude non-cash expenses of stock-based compensation, equity securities fair value adjustment, derivative and warrant fair value adjustment, and intangibles amortization expense.

It also excludes non-recurring payroll tax on initial RSU release, restructuring charges, loss on extinguishment of debt, gain on lease termination, legal contingency accrual, and convertible note payment-in-kind (“PIK”) interest and issuance discount amortization.

Adjusted Net 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 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.

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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)

(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 Loss and Adjusted EBITDA to our net loss, which is the most directly comparable GAAP measure, for the periods indicated:

Year Ended December 31,

(in thousands, except percentages) 2020 2019 2018

(in millions, except percentages) 2021 2020 2019

Net loss (GAAP) $ (662) $ (253) $ (339)

Stock-based compensation 536 38 13

Equity securities fair value adjustment (1)

Derivative and warrant fair value adjustment (1)

25,940 (6,243) 18,022

Intangibles amortization expense (2)

3,714 2,945 613

Inventory impairment – Current Period (3)

119 10,363 15,103

Inventory impairment — Prior Periods (4)

(10,544) (14,941) (2,419)

Inventory valuation adjustment – Current Period (3)(4)

Inventory valuation adjustment – Prior Periods (3)(5)

Restructuring (6)

30,752 3,428 —

Convertible note PIK interest and discount amortization (7)

7,838 4,102 478

Loss on extinguishment of debt — 11 —

4,515 (498) 1,271

Gain on lease termination (5) — —

Payroll tax on initial RSU release 5 — —

Legal contingency accrual

Adjusted Net Loss $ (116) $ (175) $ (327)

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

21,755 15,043 4,572

Depreciation and amortization, excluding amortization of intangibles

Property financing (9)

37,571 84,314 47,725

Other interest expense (10)

22,398 21,312 12,253

Interest income (11)

(4,732) (11,999) (3,869)

Income tax expense 1 — —

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________________

(1) Represents the gains and losses on our derivative and warrant liabilities, 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.

(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 impairment — Current Period is the inventory impairment charge recorded during the period presented associated with homes that remain in inventory at period end.

(4) Inventory impairment — Prior Periods is the inventory valuation adjustments recorded in prior periods associated with homes that sold in the period presented.

(3) 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.

(4) Inventory valuation adjustment — Current Period is the inventory valuation adjustment charge 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) Restructuring costs consist mainly of employee termination benefits, relocation packages and retention bonuses as well as costs related to the exiting of certain non-cancelable leases.

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In 2019, these costs related mainly to the centralization of our administrative and selling functions, including the relocation of local teams to Phoenix.

(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 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, accrued legal matters and sublease income.

(7) 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

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)

(8) Includes interest expense on our senior revolving credit facilities and our asset-backed mezzanine term debt facilities.

(9) Includes amortization of debt issuance costs and loan origination fees, commitment fees, unused fees, and other interest related costs on our senior revolving credit facilities and our mezzanine term debt facilities.

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

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.

(8) 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.

(9) Includes interest expense on our non-recourse asset-backed debt facilities.

(10) 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.

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

Components of Our Results of Operations

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 have meaningfully declined since the start of the year.

We experienced sequential, quarter-over-quarter declines in revenue in the second, third, and fourth quarters of 2020 and expect to return to sequential quarter-over-quarter revenue growth in the first quarter of 2021.

We plan to continue rebuilding our inventory throughout these periods and currently expect to return to 2019 revenue levels, on a run-rate basis, as we exit 2021.

We generate the majority of our revenue from the sale of homes that we previously acquired from homeowners.

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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Cost of Revenue

Cost of revenue includes the property purchase price, acquisition costs, direct costs to renovate or repair the home and real estate inventory valuation adjustments, if any.

Cost of revenue includes the property purchase price, acquisition costs, direct costs to renovate or repair the home and inventory valuation adjustments.

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.

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

Sales, marketing and operations expense consists primarily of resale broker commissions (paid to the home buyers’ real estate 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 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.

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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.

We expect our recurring general and administrative expense to increase following the Closing, as we begin to incur public company costs.

See “— The Business Combination ” above.

Additionally, we expect a significant increase in stock-based compensation in the first half of 2021 for certain performance-based awards as well as for our historical RSUs satisfying the liquidity based vesting condition to the extent the time-based vesting condition had been satisfied or partially satisfied.

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

We incurred a significant increase in stock-based compensation in 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 Operating expenses.

See “ Part II – Item 8.

Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 14.

Subsequent Events ” for additional information.

Share-based Awards ” for additional information.

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)

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

Technology and Development Expense

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Derivative and Warrant Fair Value Adjustment

Derivative and warrant fair value adjustment consists of unrealized and realized gains and losses as a result of marking our warrants and embedded derivatives related to the Convertible Notes to fair value at the end of each reporting period and subsequent settlement through exercise of warrants and conversion of Convertible Notes to equity.

Derivative and warrant fair value adjustment consists of unrealized and realized gains and losses as a result of marking our warrants and embedded derivatives related to the 2019 Convertible Notes to fair value at the end of each reporting period and subsequent settlement through exercise of warrants and conversion of the 2019 Convertible Notes to equity.

Loss on Extinguishment of Debt

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Interest expense varies period over period, primarily due to fluctuations in our inventory volumes and changes in LIBOR, 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 revenue 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.

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 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

7 unchanged sentences

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)

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

Results of Operations

2 unchanged sentences

Year Ended December 31, Change in

(in thousands, except percentages) 2020 2019 $ %

(in millions, except percentages) 2021 2020 $ %

Revenue $ 8,021 $ 2,583 $ 5,438 211 %

8 unchanged sentences

Derivative and warrant fair value adjustment 12 8 4 50 %

Loss on extinguishment of debt (11,356) — (11,356) N/M

Loss on extinguishment of debt — (11) 11 (100) %

Interest expense (143) (68) (75) 110 %

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Loss before income taxes (661) (253) (408) 161 %

Income tax expense (63) (252) 189 (75) %

Income tax expense (1) — (1) N/M

Net loss (662) (253) $ (409) 162 %

Less net income attributable to noncontrolling interest — 1,847 (1,847) (100) %

Net loss attributable to Opendoor Technologies Inc.

$ (286,760) $ (341,017) $ 54,257 (16) %

N/M - Not meaningful.

Revenue decreased by $2,157.5 million, or 46%, for the year ended December 31, 2020 compared to the year ended December 31, 2019.

The decrease in revenue was primarily attributable to lower sales volumes, reflecting the decline in our inventory levels in response to the COVID-19 pandemic.

Revenue increased by $5.4 billion, or 211%, for the year ended December 31, 2021 compared to the year ended December 31, 2020.

The increase in revenue was primarily attributable to higher sales volumes in 2021 compared to 2020, as well as higher revenue per home.

We sold 21,725 homes during the year ended December 31, 2021, compared to 9,913 homes during the year ended December 31, 2020, representing an increase of 119%, while revenue per home sold increased 42% between periods.

The higher sales volumes are a reflection of growing market share in existing markets and, to a lesser extent, our expansion into new markets.

We successfully grew our inventory levels throughout 2021, allowing us to sell-through significantly more homes relative to 2020, when we had much lower inventory levels due to our temporary pause in home purchases at the start of the COVID-19 pandemic.

See “— Business Impact of COVID-19 ”.

We sold 9,913 homes during the year ended December 31, 2020, compared to 18,799 homes during the year ended December 31, 2019, representing a decrease of 47%, while the average resale home price increased 2.2% between periods.

Cost of revenue decreased by $2,076.0 million, or 47%, for the year ended December 31, 2020 compared to the year ended December 31, 2019.

This decrease in cost of revenue was primarily attributable to lower sales volumes.

Gross profit margins improved from 6.4% to 8.5% for the year ended December 31, 2019 and December 31, 2020, respectively.

For the same periods, adjusted Gross Margins improved from 6.3% to 8.2%.

Gross margin improvement was primarily due to pricing improvements, home renovation efficiency, and margins associated with adjacent services.

Contribution Margin increased from 1.9% to 4.3% for the same periods, due largely to higher Adjusted Gross Margins as well as improvements in direct selling and holding costs.

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 $4.9 billion, or 209%, for the year ended December 31, 2021 compared to the year ended December 31, 2020.

This increase in cost of revenue was primarily attributable to higher sales volumes and a 41% increase in cost of revenue per home as a result of inventory mix, home price appreciation and Buybox expansion.

Gross margin improved from 8.5% to 9.1% for the year ended December 31, 2020 and December 31, 2021, respectively.

For the same periods, Adjusted Gross Margin improved from 8.2% to 9.6%.

The gross margin increase was primarily due to a combination of higher resale prices relative to our net purchase price for homes, repair and renovation efficiencies, and the effectiveness of our inventory resale systems.

Contribution Margin increased from 4.3% to 6.5% 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

Sales, Marketing and Operations .

Sales, marketing and operations decreased by $189.7 million, or 49%, for the year ended December 31, 2020 compared to the year ended December 31, 2019.

The decrease was primarily attributable to a $42.1 million decrease in advertising expense, as we largely suspended paid marketing spend in the second quarter of 2020 in response to COVID-19 before gradually resuming spend in the second half of the year.

In addition, property holding costs declined by $38.7 million due to lower inventory volumes.

Resale broker commissions and resale transaction costs declined by $60.1 million and $15.2 million, respectively, due to lower resale volumes.

Personnel expenses decreased by $26.7 million due to headcount reductions, as a result of the April 2020 workforce reduction.

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)

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

Operating Expenses

Sales, Marketing and Operations .

Sales, marketing and operations increased by $349 million, or 179%, for the year ended December 31, 2021 compared to the year ended December 31, 2020.

The increase was primarily attributable to a $123 million increase in resale transaction costs and broker commissions, consistent with the 119% increase in the number of homes sold.

In addition, advertising expense increased by $90 million 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.

Property holding costs increased by $71 million consistent with increased inventory levels.

Personnel expenses, including salaries and benefits increased $28 million consistent with the increase in headcount.

General and Administrative .

General and administrative increased by $467 million, or 305%, for the year ended December 31, 2021 compared to the year ended December 31, 2020.

The increase was primarily attributable to $19.9 million of additional stock based compensation from the commencement of expense recognition of certain performance awards upon the consummation of the Business Combination in December 2020.

In addition, the Company incurred $18.4 million of costs related to exiting certain non-cancelable leases with no future benefits to the Company.

The increase was primarily attributable to $430 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.

Personnel expenses, including salaries and benefits increased $22 million consistent with the increase in headcount.

Technology and Development .

Technology and development increased by $76 million, or 131%, for the year ended December 31, 2021 compared to the year ended December 31, 2020.

The increase was primarily attributable to a $7.7 million increase in amortization of internally developed software.

The increase was primarily attributable to a $56 million increase in stock-based compensation reflecting both an increase in headcount as well as the recognition of stock-based compensation beginning in 2021 when the February 2021 Offering satisfied the liquidity event vesting condition of certain RSUs.

Personnel expenses, including salaries and benefits increased $12 million consistent with the increase in headcount.

Derivative and Warrant Fair Value Adjustment

Derivative and warrant fair value adjustment decreased by $32.2 million, to a $25.9 million loss from a $6.2 million gain for the year ended December 31, 2020 compared to the year ended December 31, 2019.

The loss was primarily attributable to an adjustment to the fair value of the embedded derivative liability related to the convertible notes.

On September 14, 2020, the holders of the convertible notes exchanged all of the outstanding convertible notes for the right to receive 21.5 million shares of Opendoor common stock immediately prior to the Closing.

At the time of the exchange, the related derivative was marked-to-market, resulting in a $23.3 million loss.

In addition, the fair value adjustment related to warrants resulted in a $2.6 million loss as compared to a $6.2 million gain during the twelve months ended December 31, 2020 and December 30, 2019, respectively, primarily attributable to changes in the fair value of the Series D convertible preferred stock.

Derivative and warrant fair value adjustment increased by $4 million, or 50%, for the year ended December 31, 2021 compared to the year ended December 31, 2020.

The adjustments recorded in the years ended December 31, 2020 and December 31, 2021 were primarily attributable to gain of $34 million and $12 million, respectively, due to a decrease in the fair value of the Sponsor Warrants between the time of the Business Combination and the completion of their redemption in July 2021.

The gains recorded for the year ended December 31, 2020 were offset by a $23 million increase in the fair value of a derivative liability in extinguishment of the Company's 2019 Convertible Notes.

Loss on Extinguishment of Debt

As the Company did not have loss on extinguishment of debt for year-ended December 31, 2019, the comparative period, it is not meaningful to discuss the change in balance period over period.

The loss on extinguishment of debt of $11.4 million resulted from the Company’s early termination of one of its mezzanine term debt facilities with a payoff amount of $26.5 million which was in excess of book basis for the facility.

Loss on extinguishment of debt decreased by $11 million, or 100%, for the year ended December 31, 2021 compared to the year ended December 31, 2020.

The loss on extinguishment of debt of $11 million in 2020 resulted from the Company’s early termination of one of its mezzanine term debt facilities.

The Company did not have any meaningful losses on extinguishment of debt during the year ended December 31, 2021.

Interest Expense

Interest expense decreased by $41.9 million, or 38%, for the year ended December 31, 2020 compared to the year ended December 31, 2019.

The decrease was primarily attributable to a 47% decrease in the average outstanding balance of our financing facilities due to the reduction in inventory levels as a result of our initial response to the COVID-19 pandemic.

This decrease was partially offset by interest expenses related to the $178.2 million in convertible notes issued in the second half of 2019 and outstanding until September 2020.

Interest expense increased by $75 million, or 110%, for the year ended December 31, 2021 compared to the year ended December 31, 2020.

The increase was primarily attributable to increases in the average outstanding balances of our asset-backed senior debt 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 $8 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 decreased by $8.1 million, or 66%, for the year ended December 31, 2020 compared to the year ended December 31, 2019.

The decrease was primarily attributable to lower interest income from cash, cash equivalents and marketable securities.

Income Tax Expense

Income tax expense decreased by a nominal amount for the year ended December 31, 2020 compared to the year ended December 31, 2019.

Other income – net increased by $34 million, or 850%, for the year ended December 31, 2021 compared to the year ended December 31, 2020.

The increase is primarily related to the $35 million fair value adjustment on marketable equity securities recorded in 2021 when a company in which we invested went public.

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)

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

Income Tax Expense

Income tax expense increased by a nominal amount for the year ended December 31, 2021 compared to the year ended December 31, 2020.

Year Ended December 31, 2020 Compared to Year Ended December 31, 2019

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Year Ended December 31, Change in

(in thousands, except percentages) 2019 2018 $ %

(in millions, except percentages) 2020 2019 $ %

Revenue $ 2,583 $ 4,741 $ (2,158) (46) %

7 unchanged sentences

Net operating loss (186) (248) 62 (25) %

Warrant fair value adjustment 6,243 (18,022) 24,265 (135) %

Derivative and warrant fair value adjustment 8 6 2 33 %

Loss on extinguishment of debt (11) — (11) N/M

Interest expense (68) (110) 42 (38) %

1 unchanged sentence

Loss before income taxes (253) (339) 86 (25) %

Income tax expense (252) (377) 125 (33) %

Income tax expense — — — N/M

Net loss (253) (339) 86 (25) %

2 unchanged sentences

$ (253) $ (341) $ 88 (26) %

Revenue increased by $2,902.5 million, or 158%, for the year ended December 31, 2019 compared to the year ended December 31, 2018.

The increase in revenue was primarily attributable a 152% increase in volume of homes sold during the year as 2019 saw 18,799 homes sold compared to 7,470 in 2018.

Growth in 2019 benefited from scaling of 12 new markets launched in 2018, as well as same-market growth in our first six markets launched prior to 2018.

Average home price increased by 2% over the period.

Cost of Revenue and Gross Profit

Cost of revenue increased by $2,734.7 million, or 160%, for the year ended December 31, 2019 compared to the year ended December 31, 2018.

This increase in cost of revenue was primarily attributable to higher volume of homes sold and is consistent with the increase in revenue.

Gross profit margins declined to 6.4% from 7.3% for the years ended December 31, 2019 and December 31, 2018, respectively.

For the same periods, Adjusted Gross Margins declined to 6.3% from 7.9%.

This decline is due in part to lower margins in newly launched markets in 2018, given the typical maturation period for new cities.

Contribution Margin declined to 1.9% from 3.5% over the same periods, in line with the change in Adjusted Gross Margins.

N/M - Not meaningful.

Revenue decreased by $2.2 billion, or 46%, for the year ended December 31, 2020 compared to the year ended December 31, 2019.

The decrease in revenue was primarily attributable to lower sales volumes, reflecting the decline in our inventory levels in response to the COVID-19 pandemic.

See “— Business Impact of COVID-19 ”.

Cost of revenue decreased by $2.1 billion, or 47%, for the year ended December 31, 2020 compared to the year ended December 31, 2019.

This decrease in cost of revenue was primarily attributable to lower sales volumes.

Gross profit margins improved from 6.4% to 8.5% for the year ended December 31, 2019 and December 31, 2020, respectively.

For the same periods, adjusted Gross Margins improved from 6.3% to 8.2%.

Gross margin improvement was primarily due to pricing improvements, home renovation efficiency, and margins associated with adjacent services.

Contribution Margin increased from 1.9% to 4.3% for the same periods, due largely to higher Adjusted Gross Margins 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 expenses increased by $188.1 million, or 95%, for the year ended December 31, 2019 compared to the year ended December 31, 2018.

The increase was primarily attributable to payment of broker commissions in connection with home sales, which saw a $72.4 million increase during the period due to higher sales volumes.

In addition, advertising increased $36.3 million as we expanded into new markets and increased our footprint in existing markets.

Personnel expenses increased by $27.9 million due to headcount expansion.

Other drivers include an increase of $22.3 million in holding costs and $12.7 million in transaction costs attributable to higher sales volume.

Sales, marketing and operations decreased by $189 million, or 49%, for the year ended December 31, 2020 compared to the year ended December 31, 2019.

The decrease was primarily attributable to a $42 million decrease in advertising expense, as we largely suspended paid marketing spend in the second quarter of 2020 in response to COVID-19 before gradually resuming spend in the second half of the year.

In addition, property holding costs declined by

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)

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

$39 million due to lower inventory volumes.

Resale broker commissions and resale transaction costs declined by $60 million and $15 million, respectively, due to lower resale volumes.

Personnel expenses decreased by $27 million due to headcount reductions, as a result of the April 2020 workforce reduction.

General and Administrative .

General and administrative expenses increased by $41.1 million, or 57%, for the year ended December 31, 2019 compared to the year ended December 31, 2018.

The increase was primarily attributable to a $16.1 million increase in personnel expenses due to headcount growth, an $8.0 million increase in rent expense and increased software expenses of $4.6 million.

General and administrative increased by $39 million, or 34%, for the year ended December 31, 2020 compared to the year ended December 31, 2019.

The increase was primarily attributable to $20 million of additional stock based compensation from the commencement of expense recognition of certain performance awards upon the consummation of the Business Combination in December 2020.

In addition, the Company incurred $18 million of costs related to exiting certain non-cancelable leases with no future benefits to the Company.

Technology and Development .

Technology and development expenses increased by $22.8 million, or 80%, for the year ended December 31, 2019 compared to the year ended December 31, 2018.

The increase was primarily attributable to a $17.6 million increase in personnel expenses due to headcount expansion.

In addition, hosting and software expenses increased by $3.5 million.

Warrant Fair Value Adjustment

The warrant fair value adjustments for the years ended December 31, 2019 and 2018 were $6.2 million and $(18.0) million, respectively.

The adjustments were primarily due to increases in our warrant liability related to the fair value measurement, specifically changes to the valuation of our common stock.

Technology and development increased by $7 million, or 14%, for the year ended December 31, 2020 compared to the year ended December 31, 2019.

The increase was primarily attributable to an $8 million increase in amortization of internally developed software.

Derivative and Warrant Fair Value Adjustment

Derivative and warrant fair value adjustment increased by $2 million, or 33% for the year ended December 31, 2020 compared to the year ended December 31, 2019.

The adjustments recorded during the year ended December 31, 2020 were primarily attributable to a gain of $34 million due to a decrease in the fair value of the Sponsor Warrants between the time of the Business Combination and December 31, 2020.

The gains were offset by a $23 million increase in the fair value of a derivative liability in extinguishment of the Company's 2019 Convertible Notes.

Loss on Extinguishment of Debt

Loss on extinguishment of debt increased from $0 to $11 million for the years ended December 31, 2019 and December 31, 2020, respectively.

The loss on extinguishment of debt of $11 million resulted from the Company’s early termination of one of its mezzanine term debt facilities in December 2020.

Interest Expense

Interest expense increased by $49.3 million, or 82%, for the year ended December 31, 2019 compared to the year ended December 31, 2018.

The increase was primarily attributable to property financing costs which increased $36.6 million due to higher inventory purchases.

Further contributing to the increase was the issuance of the convertible notes between July and November 2019.

Interest expense decreased by $42 million, or 38%, for the year ended December 31, 2020 compared to the year ended December 31, 2019.

This decrease was partially offset by interest expenses related to the $178 million in convertible notes issued in the second half of 2019 and outstanding until September 2020.

Other Income — Net

Other income-net increased by $9.8 million, or 377%, for the year ended December 31, 2019 compared to the year ended December 31, 2018.

The increase was primarily attributable to our increased investment in marketable securities during the period.

Income Tax Expense

Income tax expense decreased by a nominal amount for the year ended December 31, 2019 compared to the year ended December 31, 2018.

Other income – net decreased by $9 million, or 69%, for the year ended December 31, 2020 compared to the year ended December 31, 2019.

The decrease was primarily attributable to lower interest income from cash, cash equivalents and marketable securities.

Liquidity and Capital Resources

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

As of December 31, 2020, we had cash and cash equivalents of $1,413 million, marketable securities of $48 million and total outstanding balances on our inventory financing facilities of $479 million.

In addition, we had committed and undrawn borrowing capacity of $1,144 million under our senior revolving credit facilities and committed and undrawn borrowing capacity of $309 million under our mezzanine term debt facilities (as described further below).

We have incurred losses each year from inception through December 31, 2020 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.

As of December 31, 2021, we had cash and cash equivalents of $1.7 billion, restricted cash of $847 million, and marketable securities of $484 million.

The Company had total outstanding balances on our asset-backed debt and other secured borrowings of $6.1 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 $2.8 billion was fully committed.

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 million after deducting underwriting discounts and commissions and offering expenses payable by us.

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 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 on hand, including the cash we obtained as a result of the Business Combination 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 Annual Report on Form 10-K.

The discussion below does not include transactions that occurred subsequent to December 31, 2020.

See “ Part II – Item 8.

Financial Statements and Supplementary Data – Notes to Consolidated Financial

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)

Statements – Note 21.

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

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 Annual Report on Form 10-K.

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 mezzanine term debt, borrowing under our mortgage repurchase financing, issuance of convertible notes and new issuances of equity.

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 financing facilities, consisting of asset-backed senior revolving credit facilities and asset-backed mezzanine term 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 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 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.

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 seen improved terms and an increase in 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.

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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 senior revolving credit facilities generally advance 80% to 90% of our cost basis in the underlying properties upon acquisition and our asset-backed mezzanine term debt facilities will finance up to 100% of our cost basis in the underlying properties upon acquisition.

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 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.

The following table summarizes certain details related to our non-recourse asset-backed debt and other secured borrowings as of December 31, 2021 (in millions, except interest rates):

Outstanding Amount

December 31, 2021 Borrowing

Current Non-Current Weighted

Interest Rate

End of Revolving / Withdrawal Period

Final Maturity

Non-Recourse Asset-backed Debt:

Asset-backed Senior Revolving Credit Facilities

The table below summarizes our asset-backed senior revolving credit facilities as of December 31, 2020:

As of December 31, 2020

Revolving Facility 2018-1 $ 250,000 $ — 4.28 % February 10, 2021 May 10, 2021

Revolving Facility 2018-2 $ 1,250 $ 759 $ — 2.84 % September 23, 2022 December 23, 2022

Revolving Facility 2018-3 750 673 — 2.39 % May 26, 2024 May 26, 2024

Revolving Facility 2019-1 900 648 — 2.84 % June 30, 2023 June 30, 2023

Revolving Facility 2019-1 300,000 32,535 3.58 % March 4, 2022 March 4, 2022

Revolving Facility 2019-2 1,850 1,149 — 2.52 % July 8, 2023 July 8, 2024

Revolving Facility 2019-3 925 886 — 3.25 % August 22, 2022 August 21, 2023

Revolving Facility 2021-1 125 125 — 2.15 % 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 — — 3.75 % 5 Years from Initial Draw Date

5 Years, 6 Months from Initial Draw Date

Total $ 7,800 $ 4,240 $ 900

In some cases, the undrawn 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 of December 31, 2020, the Company had fully committed borrowing capacity with respect to asset-backed senior revolving credit facilities of $1,483 million.

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)

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.

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

Issuance Costs (3)

Carrying Value $ 897

Asset-backed Mezzanine Term Debt Facilities

In addition to the asset-backed senior revolving 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 December 31, 2020:

As of December 31, 2020

Term Debt Facility 2016-M1 $ 149,000 $ 40,000 10.00 % October 31, 2022 April 30, 2024

Term Debt Facility 2020-M1 300,000 100,000 10.00 % January 23, 2023 January 23, 2026

Term Debt Facility 2020-M1 $ 3,000 $ — $ 1,000 10.00 % April 1, 2025 April 1, 2026

Total $ 3,000 $ — $ 1,000

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Carrying Value $ 965

Undrawn amounts under the mezzanine term debt facilities of $309 million as reflected in the table above are fully committed and generally may be drawn at any time during the draw period.

See “ Part II – Item 8.

Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 7.

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

Total Non-Recourse Asset-backed Debt $ 10,800 $ 4,240 $ 1,862

Recourse Debt - Other Secured Borrowings:

Mortgage Financing

Repo Facility 2019-R1 $ 100 $ 7 $ — 1.84 % May 26, 2022 May 26, 2022

Total Recourse Debt $ 100 $ 7 $ —

Asset-backed Senior Revolving Credit Facilities

We classify the senior revolving credit facilities as current liabilities on our 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 of December 31, 2021, we had fully committed borrowing capacity with respect to asset-backed senior revolving credit facilities of $3.9 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.

Asset-backed Senior Term Debt Facilities

We classify our senior term debt facilities as non-current liabilities in our consolidated balance sheets.

The carrying value of the non-current liabilities is reduced by issuance costs of $3 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 of December 31, 2021, we had fully committed borrowing capacity with respect to asset-backed senior term debt facilities of $1.7 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 of December 31, 2021, we had fully committed borrowing capacity with respect to asset-backed mezzanine term debt facilities of $2.3 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.

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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.

Convertible Senior Notes

In August 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):

December 31, 2021 Aggregate Principal Amount

Unamortized Debt Issuance Costs Net Carrying Amount

2026 Notes $ 978 $ (24) $ 954

See “ Part II – Item 8.

Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 7.

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

Credit Facilities and Long-Term Debt ” for additional information regarding our debt and financing arrangements.

The following table summarizes our cash flows for the years ended December 31, 2021, 2020 and 2019:

Year Ended December 31,

(in thousands) 2020 2019 2018

Net cash provided by (used in) operating activities $ 681,911 $ (272,050) $ (1,179,637)

(in millions) 2021 2020 2019

Net cash (used in) provided by operating activities $ (5,794) $ 682 $ (272)

Net cash used in investing activities $ (476) $ (22) $ (95)

Net cash provided by (used in) financing activities $ 160,661 $ 646,179 $ 1,496,494

Net increase (decrease) in cash, cash equivalents, and restricted cash $ 820,706 $ 279,051 $ 309,425

Net Cash Provided by (Used in) Operating Activities

Net cash provided by (used in) operating activities was $681.9 million, ($272.1) million and ($1,179.6) million for the years ended December 31, 2020, 2019 and 2018, respectively.

In 2020, cash provided by operating activities was primarily driven by a $834.1 million reduction in real estate inventory offset by our net loss net of non-cash items of ($149.2) million.

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)

2019, cash used in operating activities reflected primarily our net loss net of non-cash items of ($260.6) million and our change in operating working capital of ($11.5) million.

In 2018, cash used in operating activities was primarily driven by an increase in inventory reflecting our expansion in new and existing markets.

Net cash provided by financing activities $ 7,342 $ 161 $ 646

Net increase in cash, cash equivalents, and restricted cash $ 1,072 $ 821 $ 279

Net Cash (Used in) Provided by Operating Activities

Net cash (used in) provided by operating activities was $(5.8) billion, $682 million and $(272) million for the years ended December 31, 2021, 2020 and 2019, respectively.

For the year ended December 31, 2021, cash used in operating activities was primarily driven by a $5.7 billion increase in real estate inventory and an $83 million increase in escrow receivables correlated to the increase in revenue during the year.

For the year ended December 31, 2020, cash provided by operating activities was primarily driven by an $834 million reduction in real estate inventory offset by our net loss net of non-cash items of $149 million.

For the year ended December 31, 2019, cash used in operating activities reflected primarily our net loss net of non-cash items of $258 million and our change in operating working capital of ($11) million.

Net Cash Used in Investing Activities

Net cash used in investing activities was $476 million, $22 million and $95 million for the years ended December 31, 2021, 2020 and 2019, respectively.

For the year ended December 31, 2020, investing activities primarily consisted of capital expenditures, including internally developed software.

For the year ended December 31, 2019, investing cash flows primarily reflect the purchase, net of sales, of marketable securities in the amount of $34.3 million.

For the year ended December 31, 2021, cash used in investing activities primarily consisted of $394 million in investments in marketable securities, $33 million for the acquisitions of Pro.com and RedDoor, net of cash acquired, the $15 million purchase of strategic investments in certain privately held companies and $33 million in capital expenditures, including internally developed software.

For the year ended December 31, 2020, cash used in investing activities primarily consisted of capital expenditures, including internally developed software.

For the year ended December 31, 2019, cash used in investing activities primarily reflected the purchase, net of sales, of marketable securities in the amount of $34 million.

In addition, we acquired OSN for $33 million and spent $28 million on capital expenditures, including internally developed software, computers and leasehold improvements.

For the year ended December 31, 2018, investing cash flows primarily reflect $20.0 million for capital expenditures, including internally developed software, computers and leasehold improvements, offset by the sale, net of purchases, of marketable securities in the amount of $17.5 million.

Net Cash Provided by Financing Activities

Net cash provided by financing activities was $160.7 million, $646.2 million and $1,496.5 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Cash provided by financing activities in 2020 was primarily attributable to proceeds from the Business Combination and PIPE Investment in the amount of $1,013.9 million, partially offset by the repayment of $816.4 million to our senior revolving credit facilities and mezzanine term debt facilities.

Cash provided by financing activities in 2019 was driven by proceeds from the issuance of preferred stock and convertible notes, as well as net proceeds from the senior revolving credit facilities and mezzanine term debt facilities to acquire new inventory.

Cash provided by financing activities in 2018 was driven mainly by proceeds from the issuance of preferred stock and net proceeds from our senior revolving credit facilities and mezzanine term debt facilities to acquire new inventory.

Net cash provided by financing activities was $7.3 billion, $161 million and $646 million for the years ended December 31, 2021, 2020 and 2019, respectively.

For the year ended December 31, 2021, cash provided by financing activities was primarily attributable to $5.7 billion net proceeds from asset-backed debt and $886 million in proceeds from the February 2021 Offering, net of $29 million of issuance costs.

In addition, we received $978 million in proceeds from the issuance of the 2026 Notes, net of $25 million of issuance costs and offset by $119 million purchase of the Capped Calls related to the 2026 Notes.

For the year ended December 31, 2020, cash provided by financing activities was primarily attributable to proceeds from the Business Combination and PIPE Investment in the amount of $1.0 billion, partially offset by the repayment of $816 million of our asset-backed debt and other secured borrowings.

For the year ended December 31, 2019, cash provided by financing activities was driven by proceeds from the issuance of preferred stock and convertible notes, as well as net proceeds from the senior revolving credit facilities and mezzanine term debt facilities to acquire new inventory.

Contractual Obligations and Commitments

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Payment Due by Year

(in thousands) Total Less than

(in millions) Total Less than

1 – 3 years 3 – 5 years More than

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$ 4,269 $ 4,269 $ — $ — $ —

Mezzanine term debt facilities (2)

Senior and mezzanine term debt facilities (2)

2,430 130 260 2,040 —

Mortgage financing (3)

Convertible senior notes (3)

990 2 5 983 —

Mortgage financing (4)

Operating leases (5)

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(2) Represents the principal amounts outstanding as of December 31, 2021 and interest payments assuming the principal balances remain outstanding until maturity.

The final maturity dates of the mezzanine term debt facilities vary, as discussed above.

The final maturity dates of the senior and mezzanine term debt facilities vary, as discussed above.

(3) Represents the principal amounts outstanding as of December 31, 2021 and interest payments assuming the principal balances remain outstanding until maturity.

(4) Represents the principal amounts outstanding as of December 31, 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.

Included estimated

interest payments, calculated using the variable rate in existence at period end over the Company’s average holding period for mortgage loans.

(5) Represents future payments for long-term operating leases that have commenced as of December 31, 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)

(5) As of December 31, 2020, we were under contract to purchase 1,742 homes for an aggregate purchase price of $466.4 million.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of December 31, 2020.

(6) As of December 31, 2021, we were under contract to purchase 5,411 homes for an aggregate purchase price of $1.9 billion.

Critical Accounting Policies and Estimates

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Based on this definition, we have identified the critical accounting policies and estimates addressed below.

In addition, we have other key accounting policies and estimates that are described in Note 1 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.

In addition, we have other key accounting policies and estimates that are described in “ Part II – Item 8.

Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 1.

Description of Business and Accounting Policies” .

Real Estate Inventory

Real estate inventory is carried at the lower of cost or net realizable value.

Real estate inventory cost includes but is not limited to the property purchase price, acquisition costs and direct costs to renovate or repair the home, less real estate inventory valuation adjustments, if any.

Property purchase price is net of our service charge and represents the cash proceeds paid to the home seller.

Real estate inventory is reviewed for impairment on a quarterly basis and as events or changes in circumstances indicate that the carrying value may not be recoverable.

If the carrying amount is not expected to be recovered, a real estate inventory valuation adjustment is recorded to cost of revenue and the related assets are adjusted to their net realizable value.

For homes under contract, if the carrying value exceeds the expected sale price less expected selling costs, the carrying value of these homes are adjusted to the expected sales price less expected selling costs.

For all other homes, if the carrying value exceeds list price or internal projection price less expected selling costs, the carrying value of these homes are adjusted to list price or projection price less expected selling costs.

Changes in our pricing assumptions may lead to a change in the outcome of our impairment analysis, and actual results may also differ from our assumptions.

Real estate inventory carrying value is equal to the lower of cost or net realizable value and each home constitutes the unit of account.

Real estate inventory cost includes but is not limited to the property purchase price, acquisition costs and direct costs to renovate or repair the home, less inventory valuation adjustments, if any.

The property purchase price is net of our service fee and represents the cash proceeds paid to the home seller.

Real estate inventory is reviewed for valuation adjustments on a quarterly basis.

If the carrying amount for a given home is not expected to be recovered, an inventory valuation adjustment is recorded to cost of revenue and the home’s carrying value is adjusted to its net realizable value.

For homes under contract, the net realizable value is the contract price less expected selling costs and any expected concessions.

For all other homes, the net realizable value is our internal projection price less expected selling costs.

Changes in our pricing assumptions may lead to a change in the outcome of our inventory valuation adjustment, and actual results may also differ from our assumptions.

Stock-Based Compensation

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Cost is recognized on a straight-line basis over the service period, which is generally the vesting period of the award.

We elected to recognize the effect of forfeitures in the period they occur.

We elected to recognize the effect of forfeitures in the period that they occur.

We determine the fair value of stock options using the Black-Scholes-Merton option pricing model, which is impacted by the following assumptions:

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• Expected Volatility.

As our shares were not actively traded on Nasdaq until December 2020, the volatility is based on a benchmark of comparable companies within the automotive sales industry and certain real estate technology companies.

As the Company’s common stock accumulates more trading history in the coming years, the Company will incorporate more of its own historical volatility and continue to use benchmark volatility with respect to periods beyond our common stock’s trading history.

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)

As our shares were not actively traded on Nasdaq until December 2020, the volatility used for stock options granted prior to the Company becoming listed is based on a benchmark of comparable companies within the automotive sales industry and certain real estate technology companies.

For stock options granted after the Company became listed, we use the implied volatility from traded Opendoor call options.

• Expected Dividend Yield.

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Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 13.

Subsequent Events” .

We determined the grant date fair value of RSUs with market and performance vesting conditions by using Monte Carlo simulations.

Shareholders’ Equity” .

We determined the grant date fair value of RSUs with market-based vesting conditions by using Monte Carlo simulations.

The assumptions for stock price volatility, contractual term, dividend yield, and stock price used in the Monte Carlo simulations are determined using the same methodology as described above.

The exception is that with respect to the stock price volatility used for the Monte Carlo simulations, the Company took into consideration the capital structure of each comparable company comprising the benchmark to isolate each comparable company’s equity volatility without the effect of leverage and then re-levered using our capital structure.

If we consider the performance conditions probable to be satisfied, we recognize the cost of these RSUs by treating each market-based condition as an accounting unit and recognizing the cost over the requisite service period with respect to each unit.

If we consider the performance conditions probable to be satisfied, we recognize the cost of these RSUs by treating each market-based condition as an unit of account and recognizing the cost over the requisite service period with respect to each unit.

We determine the requisite service period by comparing the derived service period to achieve the market-based condition and the explicit service-based period, if any, using the longer of the two service periods as the requisite service period.

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Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 14.

Business Combinations and Note 14.

Share-Based Awards” .

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)

Derivative Instruments

We account for our derivative instruments in accordance with ASC 815, Derivatives and Hedging .

Our derivative instruments consist of interest rate caps, interest rate lock commitments and embedded conversion options related to the convertible notes.

Our derivative instruments are freestanding in nature and may be utilized as economic hedges and therefore, the changes in these derivative instruments are recorded as a gain or loss to operations.

We evaluate our convertible debt to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with Accounting Standards Codification, or ASC 815-15, “Derivatives and Hedging:

Embedded Derivatives.” The result of this accounting treatment is that the fair value of the bifurcated derivative is marked-to-market each balance sheet date and recorded as a liability;

the change in fair value is recorded in the Statement of Operations as a gain or loss.

Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity.

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is reassessed at the end of each reporting period.

Equity instruments that are initially classified as equity that become subject to reclassification are reclassified to liability at the fair value of the instrument on the reclassification date.

Derivative instrument liabilities will be classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument is expected within 12 months of the balance sheet date.

The fair value of the embedded conversion options is estimated using a lattice model incorporating the probabilities of various liquidity events which constituted conversion triggering events within the convertible notes.

Key assumption of the lattice model is the timing of possible liquidity events.

Based on the structure of the convertible notes and our redemption option, which if exercised sufficiently in advance of such conversion events, would allow us to redeem such convertible notes;

we valued the embedded conversion options with the assumption that we would preempt liquidity events by asserting its redemption option and thereby narrowing the valuation to terms of the redemption option.

These assumptions require significant management judgment.

In addition, changes in any of these variables during a period can result in material changes in the fair value and resultant gains or losses of this derivative instrument.

Public and Sponsor Warrants

On April 30, 2020, SCH consummated its initial public offering (the “IPO”) of 41,400,000 units, consisting of one share of Class A common stock and one third of one warrant exercisable for Class A common stock, at a price of $10.00 per unit.

Each whole warrant entitles the holder to purchase one share of Class A common stock at an exercise price of $11.50 per share

(the “Public Warrants”).

Simultaneously with the closing of the IPO, SCH completed the private placement of 6,133,333 warrants to SCH’s sponsor at a price of $1.50 per warrant (the “Sponsor Warrants”).

Each Sponsor Warrant allowed the sponsor to purchase one share of Class A common stock at $11.50 per share.

The Sponsor Warrants and shares of common stock issuable upon the exercise of Sponsor Warrants may not be transferred, assigned, or sold until 30 days after the completion of a business combination.

Additionally, the Sponsor Warrants are eligible for cash and cashless exercises, at the holder’s option, and are redeemable only if the Reference Value, as defined in the Warrant Agreement, is less than $18.00 per share.

We evaluated the Public and Sponsor Warrants under ASC 815-40, Derivatives and Hedging-Contracts in Entity’s Own Equity , and concluded that the Sponsor Warrants did not meet the criteria to be classified in shareholders’ equity.

Specifically the exercise and settlement features for the Sponsor Warrants precluded them from being considered indexed to the Company’s own stock given that a change in the holder of the Sponsor Warrants may alter the settlement of the Sponsor Warrants.

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 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 consolidated statement of operations at each reporting period.

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

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

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Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 1.

Description of Business” .

Description of Business and Accounting Policies” .

OPENDOOR TECHNOLOGIES INC.

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-K

Item 7. Management’s Discussion and Analysis