Opendoor Technologies Inc. 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk. We are exposed to market risks in the ordinary course of our business. These risks primarily consist of fluctuations in interest rates and exposure to inflationary pressures. Interest Rate Risk We are subject to market risk by way of changes in interest rates on borrowings under our inventory financing facilities. The Company had total outstanding balances on our asset-backed debt and other secured borrowings of $4.4 billion, 69% of which was fixed rate with an average duration of 3.3 years and the remaining 31% was based on a floating rate. Total interest expense for the year ended December 31, 2022 was $329 million, of which $134 million was fixed and $195 million was floating. As of December 31, 2022 and December 31, 2021, we had outstanding borrowings of $1.4 billion and $4.2 billion, respectively, which bear interest at floating benchmark reference rates (“Benchmark Rates”), based on a London Interbank Offered Rate (“LIBOR”) or the secured overnight financing rate (“SOFR”), plus an applicable margin. Accordingly, fluctuations in market interest rates may increase or decrease our interest expense. We may use interest rate cap derivatives, interest rate swaps, or other interest rate hedging instruments to economically hedge and manage interest rate risk with respect to our variable floating rate debt. Many of our floating rate debt facilities also have Benchmark Rate floors. Assuming no change in the outstanding borrowings on our credit facilities, we estimate that a one percentage point increase in the applicable Benchmark Rates would increase our annual interest expense by approximately $14 million and $37 million for the years ended December 31, 2022 and 2021, respectively. Inflation Risk We believe the inflation experienced in the last year has impacted the cost of goods and services that we consume, such as labor and materials costs for home repairs. We endeavor to offset these impacts in our business through appropriately considering them in our pricing and operational models. However, if our costs were to become subject to significant incremental inflationary pressure, we may not be able to fully offset such higher costs by adjusting our operational model or our pricing methodology. Our inability to do so could harm our business, results of operations, and financial condition. 62 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC.