What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-02-23 compared with 2022-02-24 · 339 added, 243 removed, 434 unchanged (57% 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, 2022 and 2021 and for the years ended December 31, 2022, 2021, and 2020.

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 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.

Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Forward-Looking Statements,” “Risk Factors” or in other parts of this Annual Report on Form 10-K.

Opendoor’s mission is to power life’s progress, one move at a time.

We are building a managed marketplace for residential real estate via two core product offerings:

our first-party (1P) product and our third-party (3P) product.

We are working towards a future where both 1P and 3P sales take place on our platform, enabling sellers and buyers to experience a simple and certain transaction that dramatically improves the traditional process.

Since our inception in 2014, we have built scalable pricing capabilities, technology-enabled centralized operations, and a suite of digital-first consumer products that enabled us to help customers buy or sell homes in over 215,000 transactions and expand our footprint to 53 markets across the country.

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

(in millions, except percentages, homes sold, number of markets, and homes in inventory) 2022 2021 2020 2021 to 2022 Change

2020 to 2021 Change

Revenue $ 15,567 $ 8,021 $ 2,583 $ 7,546 $ 5,438

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Homes in inventory (at period end) 12,788 17,009 1,826 (4,221) 15,183

Business Impact of COVID-19

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

Current Housing Environment

The residential real estate market started 2022 quite strong with housing transaction volume, velocity, and home price appreciation (HPA) trending at or near historical highs.

However, the second half of 2022 was dominated by concerns of elevated inflation, rising interest rates, and increasing possibility of recession.

In response to surprisingly persistent inflationary pressures, the U.S.

Federal Reserve Board implemented a series of rate increases, increasing the Federal Funds Rate from 0.25% to 4.5% at the end of the year and marking the most aggressive response by the U.S.

Federal Reserve Board since the early 1980s.

These actions pushed long-term interest rates higher with mortgage rates following suit.

The ensuing decline in housing affordability drove a sharp pullback in home buyer demand, which precipitated a very rapid slowdown in both transaction velocity and home price appreciation (“HPA”) in the second half of 2022.

OPENDOOR TECHNOLOGIES INC.

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(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.

In light of the market uncertainty and our reduced volume expectations, we scaled back our operational capacity by reducing both third-party labor and our internal workforce.

In addition, on November 2, 2022, we announced a workforce reduction of approximately 550 employees, representing 18% of our workforce at that time.

We provided post-employment benefits to impacted employees for a total cash cost of approximately $17 million, which was recognized and primarily paid in 2022.

Overall economic dynamics as of the beginning of 2023 look more balanced than as of the second half of 2022.

In particular, the seasonal relative improvement in listing prices, contract prices, and clearance has been, so far, better than in a typical year.

Of course, there remains significant macro risk in the outlook, with inflation, rate volatility and recession probabilities still at high levels.

The extent to which these factors impact our results and financial position will depend on future developments, which are uncertain and difficult to predict.

As a result, we are entering 2023 with a conservative bias in our home pricing, which reflects our current expectation for negative year-over-year HPA for 2023.

Business Impact of COVID-19

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.

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

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

We surpassed pre-COVID-19 inventory levels in the second quarter of 2021 and ended the year with inventory of $4.5 billion as of December 31, 2022.

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Residential real estate is one of the largest consumer markets, with approximately $1.9 trillion of home value transacted annually.

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.

Given the fact that we operate in a highly fragmented industry and offer a differentiated value proposition to the incumbent agent-led transaction, we believe there is significant opportunity to expand our share in our existing cities.

By providing a consistent, high-quality and differentiated experience to our customers, we hope to continue to drive positive word-of-mouth awareness and trust in our platform.

We believe this creates a virtuous cycle, whereby more home sellers will request an offer from Opendoor, allowing us to deepen our market penetration.

We are launching our 3P product in certain markets where our sellers will connect directly with our buyers thereby expanding our target audience to additional sellers.

We expect this marketplace to reduce our inventory exposure, capital intensity and macroeconomic risk, which we believe has the potential to positively impact our results.

We also expect to launch our new partnership agreement with Zillow, Inc.

in early 2023 that will allow home sellers on the Zillow, Inc.

platform to request an offer directly from Opendoor, which will create an additional channel for us to drive brand awareness and acquire customers.

Expansion into New Markets

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

We operated in 53 markets as of December 31, 2022.

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

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Number of markets (at period end) 53 44 21

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.

OPENDOOR TECHNOLOGIES INC.

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

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

We launched seven new markets in the first half of 2022, before we slowed our new market expansion plans due to the deteriorating macro environment in the latter half of the year, during which we launched two new markets.

We view the first year of a market launch as an investment period during which we refine our pricing models, renovation strategies and cost structure.

Historically, we have seen underwriting performance for purchase cohorts in new markets improve approximately one year after initial launch.

While new markets do not contribute significantly to revenue during their first year of operation, they provide a foundation for long-term growth once local operational and pricing capabilities have been refined.

We 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.

However, given our “risk-off” stance in our 1P business pending stabilization of macro conditions, we do not expect to make significant investments to support our 2022 market launches.

As a result, we also expect the revenue contribution from these markets to be immaterial until we see a sustained period of stabilization and recovery in the macro environment.

Adjacent Services

We believe home sellers and buyers value simplicity and convenience.

To that end, we are building an online, integrated suite of home services, which currently include title insurance and escrow services, Buy with Opendoor, 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.

We believe home sellers and buyers value simplicity and certainty.

To that end, we are building an online, integrated suite of home services, which currently include title insurance and escrow services, brokerage services and mortgage services.

In 2022, we shifted from a correspondent mortgage model to a referral model with a strategic partner to offer our customers a broader suite of mortgage products and services.

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

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

We will continue to evaluate new ways to improve our end-to-end solution and expect to invest in additional adjacent products and services over time.

OPENDOOR TECHNOLOGIES INC.

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

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

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 with the expectation that these adjacent services will continue to improve our unit economics and Contribution Margin.

Unit Economics

We view Contribution Margin and Contribution Margin after Interest as key measures of unit economic performance.

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

• Successful incremental attach of services that supplement the core transaction margin profile via our existing services as well as new ones.

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

• Lowering platform costs through process refinement, greater automation and self-service, and more efficient forms of financing.

We view Contribution Margin as a key measure of unit economic performance.

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

• Optimization and enhancements of our pricing engine

• Platform efficiency improvements through greater automation and self-service

• Incremental attach of services, which supplement the core transaction margin profile

• Expansion of our 3P product offering, which will reduce our inventory exposure and capital intensity, and eliminate any holding and selling costs associated with taking ownership of the home

Inventory Management

Effectively managing our overall inventory position is critical to our financial performance.

Effectively managing our overall inventory position and balancing growth, margin, and risk are 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.

We typically seek to maximize the resale margin performance of our inventory in the context of managing overall risk and inventory health through monitoring sell-through rates, holding periods, and portfolio aging.

Our performance in 2022 reflects the sharp transition in the housing market from peak levels earlier this year to lower transaction velocity and home price appreciation well beyond typical seasonal trends.

Given these macroeconomic pressures, we have been focused on managing for overall inventory health and risk.

As part of that focus, we have continued to adjust down listed prices on our inventory to stay in-line with the market and drive resale clearance.

Related to those price actions, we have recorded inventory valuation adjustments of $737 million during the year ended December 31, 2022.

We have also proactively reduced our acquisition pace via higher spreads embedded in our offers and lower marketing investment.

While this allows us to manage overall inventory growth, we expect future margins on those acquisition cohorts to be in-line with our expectations for positive contribution margins.

We expect to resume a higher acquisition pace as the housing market stabilizes.

As one key measure of inventory management performance, we evaluate our portfolio metrics relative to the broader market (as observed on the multiple listing services (“MLS”)).

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".)

As of December 31, 2022, such homes represented 55% of our portfolio, compared to 33% for the broader market when filtered for the types of homes we are able to underwrite and acquire

OPENDOOR TECHNOLOGIES INC.

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

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

in a given market based on characteristics such as price range, home type, home location, year built and lot size (which we refer to as our “buybox".) This metric is impacted by the mix of homes in our inventory.

Beginning early in the third quarter of 2022, we significantly reduced our offer pace and subsequent closings of new home acquisitions in light of our risk management objective and overall macroeconomic uncertainty.

When newly acquired homes represent a smaller proportion of our overall inventory, average days on market for our portfolio generally increases and we expect this trend to continue into early 2023.

Inventory Financing

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

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

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

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.

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

In general, we expect our financial results and working capital requirements to reflect seasonal variations over time.

However, other factors, including growth, market expansion and changes in macroeconomic conditions, such as rising inflation and interest rate increases as recently observed, have obscured the impact of seasonality in our historical financials and we expect may continue to do so.

Non-GAAP Financial Measures

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We may calculate or present our non-GAAP financial measures differently than other companies who report measures with similar titles and, as a result, the non-GAAP financial measures we report may not be comparable with those of companies in our industry or in other industries.

Adjusted Gross Profit, Contribution Profit and Contribution Profit After Interest

To provide investors with additional information regarding our margins and return on inventory acquired, we have included Adjusted Gross Profit, Contribution Profit and Contribution Profit After Interest, which are non-GAAP financial measures.

We believe that Adjusted Gross Profit, Contribution Profit and Contribution Profit After Interest are useful financial measures for investors as they are supplemental measures used by management in evaluating unit level economics and our

OPENDOOR TECHNOLOGIES INC.

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

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

operating performance in our key markets.

Adjusted Gross Profit and Contribution Profit

To provide investors with additional information regarding our margins and return on inventory acquired, we have included Adjusted Gross Profit and Contribution Profit, which are non-GAAP financial measures.

We believe that Adjusted Gross Profit and Contribution Profit are useful financial measures for investors as they are supplemental measures used by management in evaluating unit level economics and our operating performance.

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

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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 senior interest costs attributable to homes sold during a reporting period.

We believe these measures facilitate meaningful period over period comparisons and illustrate our ability to generate returns on assets sold after considering the costs directly related to the assets sold in a given period.

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

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

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

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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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.

Restructuring in

OPENDOOR TECHNOLOGIES INC.

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

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

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 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.

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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.

See “— Critical Accounting Policies and Estimates — Real Estate Inventory” for detailed discussion of inventory valuation adjustment.

We view this metric as an important measure of business performance as it captures gross margin performance isolated to homes sold in a given period and provides comparability across reporting periods.

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Contribution Profit helps management assess inflows and outflows directly associated with a specific resale cohort.

Contribution Profit / Margin After Interest

We define Contribution Profit After Interest as Contribution Profit, minus interest expense under our non-recourse asset-backed senior debt facilities incurred on the homes sold during the period.

This may include interest expense recorded in periods prior to the period in which the sale occurred.

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

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

” In addition to our senior debt facilities, we use a mix of debt and equity capital to finance our inventory and that mix will vary over time.

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.

OPENDOOR TECHNOLOGIES INC.

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

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

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:

The following table presents a reconciliation of our Adjusted Gross Profit and Contribution Profit to our gross profit, which is the most directly comparable GAAP measure, for the periods indicated:

Year Ended December 31,

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Contribution Margin 3.4 % 6.5 % 4.3 %

Interest on homes sold – Current Period (9)(10)

________________

Interest on homes sold – Prior Periods (9)(11)

(1) (10) (13)

Contribution Profit After Interest

$ 482 $ 82 $ 27

Contribution Margin After Interest 6.0 % 3.2 % 0.6 %

________________

(1) Inventory valuation adjustment includes adjustments to record real estate inventory at the lower of its carrying amount or its net realizable value.

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

OPENDOOR TECHNOLOGIES INC.

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

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

(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.

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(8) Represents holding costs incurred in prior periods on homes sold in the period presented.

(9) This does not include interest on mezzanine term debt facilities or other indebtedness.

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

OPENDOOR TECHNOLOGIES INC.

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

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

(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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These measures are also commonly used by investors and analysts to compare the underlying performance of companies in our industry.

We believe these measures provide investors with meaningful period over period comparisons of our underlying performance, adjusted for certain charges that are non-recurring, non-cash, not directly related to our revenue-generating operations or not aligned to related revenue.

Adjusted Net Loss and Adjusted EBITDA are supplemental measures of our operating performance and have important limitations.

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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.

It excludes expenses that are not directly related to our revenue-generating operations such as restructuring charges and legal contingency accruals.

It excludes loss on extinguishment of debt as these expenses were incurred as a result of decisions made by management to repay portions of our outstanding credit facilities early;

these expenses are not reflective of ongoing operating results and vary in frequency and amount.

It also excludes non-recurring payroll tax on initial RSU release, gain on lease termination, goodwill impairment 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.

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Gain on lease termination — (5) —

Goodwill impairment 60 — —

Payroll tax on initial RSU release — 5 —

Legal contingency accrual

Legal contingency accrual and related expenses

Adjusted Net Loss $ (574) $ (116) $ (175)

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(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.

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

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

(6) 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.

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

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

(6) Restructuring costs consist mainly of employee termination benefits, relocation packages and bonuses as well as costs related to the exiting of certain non-cancelable leases.

(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

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

OPENDOOR TECHNOLOGIES INC.

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(Tabular amounts in 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.

(8) Includes primarily gain or loss on interest rate lock commitments, gain or loss on the sale of available for sale securities, sublease income, and income from equity method investments.

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

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

In addition, we generate revenue from additional services we provide to both home sellers and buyers, which consists primarily of title insurance and escrow services, Buy with Opendoor and Opendoor Home Loans.

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 and brokerage services.

Home sales revenue from selling residential real estate is recognized when title to and possession of the property has transferred to the buyer and we have no continuing involvement with the property, which is generally the close of escrow.

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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 inventory valuation adjustments.

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

These costs are accumulated in real estate inventory during the property holding period and charged to cost of revenue under the specific identification method when the property is sold.

Real estate inventory is reviewed for valuation adjustments at least quarterly.

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

Additionally, for our revenue other than home sales revenue, cost of revenue consists of any costs incurred in delivering the service, including associated headcount expenses such as salaries, benefits and stock-based compensation.

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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 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.

Share-based Awards ” for additional information.

Technology and Development Expense

Technology and development expense consists primarily of headcount expenses, including salaries, benefits and stock-based compensation for employees in the design, development, testing, maintenance and operation of our websites, tools, applications, and mobile apps that support our products.

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

OPENDOOR TECHNOLOGIES INC.

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

Technology and Development Expense

Technology and development expense consists primarily of headcount expenses, including salaries, benefits and stock-based compensation for employees in the design, development, testing, maintenance and operation of our mobile applications, websites, tools and applications that support our products.

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

Goodwill Impairment Expense

Goodwill impairment expense consists of impairment charges recorded as a result of goodwill impairment testing.

Restructuring Expense

Restructuring expense consists primarily of severance and other termination benefits for employees whose roles have been eliminated as well as costs related to the exiting of certain non-cancelable leases with no future benefits to the Company.

Derivative and Warrant Fair Value Adjustment

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Loss on Extinguishment of Debt

Loss on extinguishment of debt is the result of the Company’s early termination of one of its mezzanine term debt facilities and certain amounts paid to lender in excess of the book basis with respect to the facility.

Loss on extinguishment of debt is the result of the Company’s partial or full termination of a debt facility and is comprised of amounts paid to the lenders in excess of the book basis, as well as unamortized deferred costs associated with the facility.

Interest Expense

Interest expense consists primarily of interest paid or payable and the amortization of debt discounts and debt issuance costs.

Interest expense varies period over period, primarily due to fluctuations in our inventory volumes and changes in LIBOR, which impact the interest incurred on our senior revolving credit facilities (see “— Liquidity and Capital Resources — Debt and Financing Arrangements ”).

Interest expense varies period over period, primarily due to fluctuations in our inventory volumes and changes in the Benchmark Rates, which impact the interest incurred on our senior revolving credit facilities (see “— Liquidity and Capital Resources — Debt and Financing Arrangements ”).

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

Subject to market conditions and cost of capital trade-offs, we will evaluate opportunities to expand our sources of financing over time, which may allow us to diversify our mix of financing sources to include more cost effective financing relative to our higher cost mezzanine term debt facilities.

Other Income — Net

Other income-net consists primarily of change in fair value of and dividend income from our investment in equity securities as well as interest income from our investment in debt securities.

Other (Loss) Income — Net

Other (loss) income-net consists primarily of changes in fair value of, and dividend income, from our investment in equity securities as well as interest income from our investment in money market funds, time deposits, and debt securities.

Income Tax Expense

20 unchanged sentences

Technology and development 169 134 35 26 %

Goodwill impairment 60 — 60 N/M

Restructuring 17 — 17 N/M

Total operating expenses 1,598 1,298 300 23 %

1 unchanged sentence

Derivative and warrant fair value adjustment — 12 (12) (100) %

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

Loss on extinguishment of debt (25) — (25) N/M

Interest expense (385) (143) (242) 169 %

Other income-net 38 4 34 850 %

Other (loss) income-net (10) 38 (48) (126) %

Loss before income taxes (1,351) (661) (690) 104 %

Income tax expense (1) — (1) N/M

Income tax expense (2) (1) (1) 100 %

Net loss $ (1,353) $ (662) $ (691) 104 %

1 unchanged sentence

Revenue increased by $7.5 billion, or 94%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.

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 ”.

Average resale prices were positively impacted by price mix within markets, overall home price appreciation and Buybox expansion.

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

We sold 39,183 homes during the year ended December 31, 2022, compared to 21,725 homes during the year ended December 31, 2021, representing an increase of 80%.

Revenue per home sold increased 8% between periods due to inventory mix, buybox expansion and home price appreciation.

Cost of Revenue and Gross Profit

Cost of revenue increased by $7.6 billion, or 104%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.

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 .”

The increase in cost of revenue was primarily attributable to higher sales volumes and a 13% increase in cost of revenue per home, excluding inventory valuation adjustments, as a result of inventory mix, buybox expansion, and home price appreciation at the time of inventory acquisition.

In addition, we recorded $458 million of inventory valuation adjustments during the year ended December 31, 2022 to adjust the cost basis of homes remaining in inventory at December 31, 2022 to their net realizable value as compared to $39 million of inventory valuation adjustments during the year ended December 31, 2021.

Gross profit decreased from $730 million to $667 million and gross margin decreased from 9.1% to 4.3% for the year ended December 31, 2021 and December 31, 2022, respectively.

For the same periods, Adjusted Gross Margin decreased from 9.6% to 7.0%.

The decrease in gross margin and Adjusted Gross Margin reflects our decision to prioritize risk management and resale clearance in the second half of 2022 at the expense of resale margin performance.

As a result of the fast downturn in the housing market due to macroeconomic conditions, market conditions at the time of sale were weaker than we believed they would be at the time of pricing our inventory acquisitions.

In addition, gross margin and Adjusted Gross Margin for the year ended December 31, 2021 benefited from a fresh book of inventory after we sold down our inventory in response to the COVID-19 pandemic and more favorable macroeconomic conditions as compared to the year ended December 31, 2022.

OPENDOOR TECHNOLOGIES INC.

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

Contribution Margin decreased from 6.5% to 3.4% for the same periods, due to the reasons noted above as well as due to increased direct selling and holding costs.

See “— Non-GAAP Financial Measures .”

Operating Expenses

1 unchanged sentence

Sales, marketing and operations increased by $462 million, or 85%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.

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.

The increase was primarily attributable to a $219 million increase in resale transaction costs and broker commissions, consistent with the 94% increase in revenue.

Property holding costs increased by $91 million, consistent with increased inventory levels and longer inventory holding periods compared to the year ended December 31, 2021 when we held a fresh book of inventory.

Advertising expense increased by $77 million, from $123 million for the year ended December 31, 2021 to $200 million for the year ended December 31, 2022 as we increased marketing to drive acquisition volumes in both existing and new markets.

Headcount expenses, including salaries and benefits, increased $50 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 $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.

General and administrative decreased by $274 million, or 44%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.

The decrease was primarily attributable to $354 million reduction in stock-based compensation due to the expense recognition of certain performance awards during the year ended December 31, 2021 following the consummation of the Business Combination in December 2020, the expense recognition of certain RSUs upon the fulfillment of the liquidity event vesting condition satisfied by the February 2021 Offering and the reversal of expense in December 2022 related to the forfeiture of certain executive performance awards.

The reduction in stock-based compensation was partially offset by a $46 million legal contingency accrual and related expenses recorded during the year ended December 31, 2022 in connection with the FTC consent order finalized in October 2022.

Headcount expenses, including salaries and benefits increased $21 million consistent with the increase in headcount.

Technology and Development .

Technology and development increased by $35 million, or 26%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.

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.

The increase was primarily attributable to a $26 million increase in headcount expenses, including salaries and benefits, consistent with the increase in headcount.

Goodwill Impairment .

Goodwill impairment increased by $60 million for the year ended December 31, 2022 compared to the year ended December 31, 2021.

During the fourth quarter of 2022, the market price of our common stock declined significantly causing the Company to perform an interim quantitative test for goodwill impairment.

Based on the quantitative analysis, the Company recorded a goodwill impairment charge of $60 million for the year ended December 31, 2022.

There was no impairment of goodwill identified for the years ended December 31, 2021 and 2020.

Restructuring.

Restructuring increased by $17 million for the year ended December 31, 2022 compared to the year ended December 31, 2021.

The restructuring expenses recorded in the year ended December 31, 2022, represented severance, and other termination benefits for employees whose roles were eliminated, and other restructuring costs related to winding down the Company’s mortgage lending and brokerage services.

Derivative and Warrant Fair Value Adjustment

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.

Derivative and warrant fair value adjustment decreased by $12 million, or 100%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.

The gain recorded in the year ended December 31, 2021 was attributable 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.

Loss on Extinguishment of Debt

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.

Loss on extinguishment of debt increased by $25 million, for the year ended December 31, 2022 compared to the year ended December 31, 2021.

The loss on extinguishment of debt of $25 million in December 31, 2022 resulted from the Company’s voluntary partial early repayment of an asset-backed mezzanine term debt facility.

Interest Expense

Interest expense increased by $242 million, or 169%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.

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 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.

The increase was primarily attributable to increases in the average outstanding balances of our asset-

OPENDOOR TECHNOLOGIES INC.

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

backed senior debt facilities and mezzanine term debt facilities, which is consistent with our increase in inventory over the same periods.

In addition, interest expense from our asset-backed senior revolving credit facilities, which bear interest at a floating reference rate based on LIBOR or SOFR, has increased due to higher reference rates during the year ended December 31, 2022 compared to the year ended December 31, 2021.

Other (Loss) Income — Net

Other (loss) income – net decreased by $48 million, or 126%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.

The decrease is primarily related to the fair value adjustments recorded on marketable equity securities.

The Company recorded a $35 million gain in 2021 when a company in which we invested went public and then recorded a $35 million loss in 2022 when the company’s stock price declined.

The fair value loss recorded in 2022 is offset by a $20 million increase in interest income due to higher interest rates during the year ended December 31, 2022 compared to the year ended December 31, 2021.

During 2022, the terms of certain of our asset-backed senior revolving credit facilities were modified to replace LIBOR-based floating reference rates with SOFR-based floating reference rates.

As of December 31, 2022, all such floating reference rates in our asset-backed senior revolving credit facilities were based on SOFR.

Income Tax Expense

11 unchanged sentences

Technology and development 134 56 78 139 %

Restructuring — 29 (29) (100) %

Total operating expenses 1,298 406 892 220 %

1 unchanged sentence

Derivative and warrant fair value adjustment 12 8 4 50 %

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

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

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

3 unchanged sentences

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

Less net income attributable to noncontrolling interest — 2 (2) (100) %

Net loss attributable to Opendoor Technologies Inc.

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

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 ”.

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 $2.1 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.

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.

The higher sales volumes are a reflection of growing market share in existing markets and, to a lesser extent,

OPENDOOR TECHNOLOGIES INC.

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

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

our expansion into new markets.

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.

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 Margins improved from 8.2% to 9.6%.

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

Contribution Margin increased from 4.3% to 6.5% for the same periods, due largely to higher Adjusted Gross Margins as well as improvements in direct selling and holding costs.

2 unchanged sentences

Sales, Marketing and Operations .

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 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.

Sales, marketing and operations increased by $355 million, or 188%, 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 transactions costs and broker commissions, consistent with the 119% increase in the number of homes sold.

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 $488 million, or 370%, for the year ended December 31, 2021 compared to the year ended December 31, 2020.

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.

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

Technology and Development .

Technology and development increased by $78 million, or 139%, for the year ended December 31, 2021 compared to the year ended December 31, 2020.

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

The increase was primarily attributable to an $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.

Restructuring.

Restructuring decreased by $29 million for the year ended December 31, 2021 compared to the year ended December 31, 2020.

The restructuring expenses recorded in the year ended December 31, 2020, represent severance, and other termination benefits for employees whose roles were eliminated, and other restructuring costs related to the exiting of certain non-cancelable leases with no future benefit to the Company.

Derivative and Warrant Fair Value Adjustment

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 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.

The adjustments recorded in the years ended December 31, 2020 and December 31, 2021 were primarily attributable to a gains 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.

OPENDOOR TECHNOLOGIES INC.

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

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

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.

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 $42 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 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 in interest expense from our asset-backed credit facilities was 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 $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.

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 was 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.

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.

Liquidity and Capital Resources

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As of December 31, 2022, we had cash and cash equivalents of $1.1 billion, restricted cash of $654 million, and marketable securities of $144 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.

The decline in our cash, cash equivalents and marketable securities balance of $934 million as compared to December 31, 2021 resulted from a combination of operating losses and borrowing less from our asset-backed senior revolving credit facilities relative to our real estate inventory as part of deleveraging of our inventory.

The decrease in our restricted cash balance of $193 million as compared to December 31, 2021 was a result of lower balances of resale proceeds being held in restricted cash accounts and the repayment of asset-backed debt.

The Company had total outstanding balances on our asset-backed debt of $4.4 billion and aggregate principal outstanding from the 2026 Notes of $978 million.

In addition, we had undrawn borrowing capacity of $7.5 billion under our non-recourse asset-backed debt facilities (as described further below), of which $2.3 billion was committed.

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.

1 unchanged sentence

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.

As market conditions warrant, we may, from time to time, repurchase our outstanding debt securities in the open market, in privately negotiated transactions, by tender offer, by exchange transaction or otherwise.

Such repurchases, if any, will depend

OPENDOOR TECHNOLOGIES INC.

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

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

on prevailing market conditions, our liquidity and other factors and may be commenced or suspended at any time.

The amounts involved and total consideration paid may be material.

We have incurred losses from inception through December 31, 2022 and expect to incur additional losses in the future.

Our ability to service our debt, fund working capital, business operations and capital expenditures will depend on our ability to generate cash from operating activities, which is subject to our future operating success, and obtain inventory acquisition financing on reasonable terms, which is subject to factors beyond our control, including general economic, political and financial market conditions.

We expect 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.

Our working capital requirements may increase should our inventory balance increase.

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.

1 unchanged sentence

Our financing activities include:

short-term borrowings under our asset-backed senior revolving credit facilities and our mortgage repurchase financing;

short-term borrowings under our asset-backed senior revolving credit facilities and, prior to the discontinuation of our mortgage origination business, our mortgage repurchase financing;

the issuance of long-term asset-backed senior term debt, asset-backed mezzanine term debt, and convertible debt;

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Our business is capital intensive and maintaining adequate liquidity and capital resources is needed as we continue to scale and accumulate additional inventory.

While there can be no assurance that these trends will continue, we have observed increased availability and engagement for this lending product across a variety of financial institutions and we have 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.

We intend to actively manage our relationships with multiple financial institutions and seek to optimize duration, flexibility, efficiency and cost of funds, but there can be no assurance that we will be able to obtain sufficient capital for our business or to do so on acceptable financial and other terms.

Our asset-backed facilities are each collateralized by a specified pool of assets, consisting of real estate inventory, restricted cash and equity interests in certain consolidated subsidiaries of Opendoor that directly or indirectly own our real estate inventory.

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 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 terms of our inventory financing facilities require an Opendoor subsidiary to comply with customary financial covenants, such as maintaining certain levels of liquidity, tangible net worth or leverage (ratio of debt to tangible net worth).

As of December 31, 2022, the Company was in compliance with all financial covenants.

Our property financing subsidiaries’ assets and credit generally are not available to satisfy the debts and other obligations of any other Opendoor entities.

Our asset-backed debt is non-recourse to Opendoor and our subsidiaries that are not party to the relevant financing arrangements, 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.

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.

Our mezzanine term facilities may finance up to 95% to 100% of our cost basis in the underlying properties upon acquisition.

The maximum initial advance rates vary by facility and generally decrease on a fixed timeline that varies by facility based on the length of time a given property has been financed and other facility-specific adjustments, including adjustments based on collateral performance.

At times, we may be required to keep amounts in restricted cash accounts to collateralize our asset-backed term debt facilities if the property borrowing base is insufficient to satisfy the borrowing base requirements.

These amounts may fluctuate due to seasonality, timing of property acquisitions and resales, and the outstanding loan balances under our asset-backed term debt facilities.

OPENDOOR TECHNOLOGIES INC.

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

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

The following table summarizes certain details related to our non-recourse asset-backed debt and other secured borrowings as of December 31, 2022 (in millions, except interest rates):

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Asset-backed Senior Revolving Credit Facilities

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 2018-2 $ 1,000 $ 472 $ — 4.86 % June 7, 2024 June 7, 2024

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 2018-3 1,000 194 — 3.98 % October 20, 2025 October 20, 2025

Revolving Facility 2019-1 900 55 — 4.41 % June 30, 2023 June 30, 2023

Revolving Facility 2019-2 1,850 167 — 3.92 % July 8, 2023 July 8, 2024

Revolving Facility 2019-3 925 — — 3.86 % April 5, 2024 April 4, 2025

Revolving Facility 2022-1 525 289 — 8.15 % December 31, 2022 October 31, 2023

Asset-backed Senior Term Debt Facilities

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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

Term Debt Facility 2021-S3 1,000 — 750 3.75 % January 31, 2027

July 31, 2027

Term Debt Facility 2022-S1 250 — 250 4.07 % March 1, 2025 September 1, 2025

Term Debt Facility 2022-S2 500 200 — 8.48 % January 31, 2023 December 31, 2023

Total $ 8,950 $ 1,377 $ 1,900

3 unchanged sentences

Term Debt Facility 2020-M1 $ 2,500 $ — $ 1,000 10.00 % April 1, 2025 April 1, 2026

Term Debt Facility 2022-M1 $ 500 $ — $ 150 10.00 % September 15, 2025 September 15, 2026

Total $ 3,000 $ — $ 1,150

2 unchanged sentences

Total Non-Recourse Asset-backed Debt $ 11,950 $ 1,376 $ 3,020

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.

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 the committed amounts are subject to the applicable lender’s discretion.

As of December 31, 2022, we had committed borrowing capacity with respect to asset-backed senior revolving credit facilities of $3.2 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.

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The carrying value of the non-current liabilities is reduced by issuance costs of $17 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.

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 the committed amounts are subject to the applicable lender’s discretion.

As of December 31, 2022, we had committed borrowing capacity with respect to asset-backed senior term debt facilities of $2.1 billion.

OPENDOOR TECHNOLOGIES INC.

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

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

The 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.

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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.

The borrowing capacity amounts under the asset-backed mezzanine term debt facilities as reflected in the table are not fully committed and any borrowing above the committed amounts are subject to the applicable lender's discretion.

As of December 31, 2022, we had committed borrowing capacity with respect to asset-backed mezzanine term debt facilities of $1.2 billion.

Mortgage Financing

We primarily use debt financing to fund our mortgage loan originations.

In 2019 we entered into a master repurchase agreement to finance substantially all of the mortgage loans that we originate.

Once our mortgage business sells a loan in the secondary mortgage market, we use the sale proceeds to reduce the outstanding balance under the repurchase facility.

We primarily used debt financing to fund our mortgage loan originations.

In 2019, we entered into a master repurchase agreement(the “Repurchase Agreement”) to finance substantially all of the mortgage loans that we originated.

Once our mortgage business sold a loan in the secondary mortgage market, we used the sale proceeds to reduce the outstanding balance under the repurchase facility.

The Repurchase Agreement was terminated in October 2022.

Convertible Senior Notes

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

Special Purpose Entities

The Company established certain special purpose entities (“SPEs”) for the purpose of financing the Company’s purchase and renovation of real estate inventory through the issuance of asset-backed debt.

The Company is the primary beneficiary of the various variable interest entities (“VIE”) within these financing structures and consolidates these VIEs.

See “ Part II – Item 8.

Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 6.

Variable Interest Entities ” for additional information regarding our VIEs.

OPENDOOR TECHNOLOGIES INC.

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

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

The following table summarizes the assets and liabilities related to the VIEs consolidated by the Company as well as the assets, liabilities and equity related to Opendoor Technologies Inc (Parent Company Only) (“Parent Company”) and subsidiaries that are not VIEs, as of December 31, 2022 (in millions):

VIE Non-VIE Total

CURRENT ASSETS:

Cash and cash equivalents $ — $ 1,137 $ 1,137

Restricted cash 636 18 654

Marketable securities — 144 144

Real estate inventory 4,858 61 4,919

Inventory valuation adjustment (450) (9) (459)

Real estate inventory, net 4,408 52 4,460

Other current assets (1)

Total current assets 5,082 1,384 6,466

OTHER ASSETS (2)

TOTAL ASSETS $ 5,082 $ 1,526 $ 6,608

CURRENT LIABILITIES:

Current senior revolver asset-backed debt 1,177 — 1,177

Current senior term asset-backed debt 199 — 199

Other current liabilities (3)

Total current liabilities 1,448 57 1,505

Long term mezzanine asset backed debt 1,137 — 1,137

Long term senior term asset backed debt 1,883 — 1,883

CONVERTIBLE SENIOR NOTES — 959 959

LEASE LIABILITIES – Net of current portion — 38 38

TOTAL LIABILITIES $ 4,468 $ 1,054 $ 5,522

SHAREHOLDERS’ EQUITY:

$ 614 $ 472 $ 1,086

________________

(1) The Company’s consolidated other current assets include the following assets as shown in the Consolidated Balance Sheets:

Escrow Receivable, $30 million;

Other Current Assets $41 million.

(2) The Company’s consolidated Other Assets include the following assets as shown in the Consolidated Balance Sheets:

Property and Equipment - Net, $58 million;

Right of Use Assets, $41 million;

Goodwill, $4 million;

Intangibles - Net, $12 million;

and Other Assets, $27 million.

(3) The Company’s Other Current Liabilities include the following liabilities as shown in the Consolidated Balance Sheets:

Accounts Payable and Other Accrued Liabilities, $110 million;

Interest Payable, $12 million;

and Lease Liabilities - Current, $7 million.

OPENDOOR TECHNOLOGIES INC.

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

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

The following table summarizes our cash flows for the years ended December 31, 2022, 2021 and 2020:

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(in millions) 2022 2021 2020

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 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.

Net cash provided by (used in) operating activities $ 730 $ (5,794) $ 682

Net cash provided by (used in) investing activities $ 234 $ (476) $ (22)

Net cash (used in) provided by financing activities $ (1,751) $ 7,342 $ 161

Net (decrease) increase in cash, cash equivalents, and restricted cash $ (787) $ 1,072 $ 821

Net Cash Provided by (Used in) Operating Activities

Net cash provided by (used in) operating activities was $730 million, $(5.8) billion and $682 million for the years ended December 31, 2022, 2021 and 2020, respectively.

For the year ended December 31, 2022, cash provided by operating activities was primarily driven by a $896 million decrease in real estate inventory.

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.

Net Cash Provided by (Used in) Investing Activities

Net cash provided by (used in) investing activities was $234 million, $(476) million and $(22) million for the years ended December 31, 2022, 2021 and 2020, respectively.

For the year ended December 31, 2022, cash provided by investing activities primarily consisted of a $300 million net decrease in marketable securities, partially offset by a $37 million increase in property and equipment, and $19 million for strategic investments in certain privately held companies.

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.

Net Cash Provided by Financing Activities

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.

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

Net Cash (Used in) Provided by Financing Activities

Net cash (used in) provided by financing activities was $(1.8) billion, $7.3 billion and $161 million for the years ended December 31, 2022, 2021 and 2020, respectively.

For the year ended December 31, 2022, cash used in financing activities was primarily attributable to $1.7 billion net principal payments on non-recourse asset-backed debt.

For the year ended December 31, 2021, cash provided by financing activities was primarily attributable to $5.7 billion net proceeds from non-recourse 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.

OPENDOOR TECHNOLOGIES INC.

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

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

Contractual Obligations and Commitments

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988 2 5 981 —

Mortgage financing (4)

Operating leases (4)

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The payment is expected to be within one year of December 31, 2022.

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

(2) Represents the principal amounts outstanding as of December 31, 2022 and estimated interest payments assuming the principal balances remain outstanding until maturity.

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

(3) Represents the principal amounts outstanding as of December 31, 2022 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.

(4) Represents future payments for long-term operating leases that have commenced as of December 31, 2022.

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

(5) As of December 31, 2022, we were under contract to purchase 1,011 homes for an aggregate purchase price of $331 million.

Critical Accounting Policies and Estimates

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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.

Inventory valuation

OPENDOOR TECHNOLOGIES INC.

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

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

adjustments are not offset by any expected gains and are not reversed or adjusted should the expected net realizable value subsequently increase.

For homes under resale 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.

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Stock-Based Compensation

Our stock-based awards include stock options, restricted stock units (“RSUs”), and shares of restricted stock (“Restricted Shares”).

Our stock-based awards include stock options, restricted stock units (“RSUs”), shares of restricted stock (“Restricted Shares”), and shares granted under our Employee Stock Purchase Plan (“ESPP”).

We recognize the cost of stock option awards granted to employees and directors based on the estimated grant-date fair value of the awards.

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Under the accelerated attribution method, compensation expense is recognized over the remaining requisite service period for each service condition tranche as though each tranche is, in substance, a separate award.

In February 2021, the Company completed an underwritten public offering, which met the liquidity event vesting condition and triggered the recognition of compensation expense for RSUs for which the time-based vesting condition had been satisfied or partially satisfied.

In February 2021, the Company completed an underwritten public offering, which met the liquidity event vesting condition and triggered the recognition of compensation expense for

OPENDOOR TECHNOLOGIES INC.

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

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

RSUs for which the time-based vesting condition had been satisfied or partially satisfied.

For further information on the February 2021 underwritten public offering, see “ Part II – Item 8.

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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”).

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”).

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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