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. As of December 31, 2023, the Company had total outstanding balances on our asset-backed debt of $2.2 billion, with an average duration of 2.6 years. Total interest expense for the year ended December 31, 2023 was $174 million, of which $156 million was fixed and $18 million was floating. As of December 31, 2023, 100% of our outstanding borrowings were at a fixed rate and did not utilize floating benchmark reference rates. As of December 31, 2022, we had outstanding borrowings of $1.4 billion, which bore interest at floating benchmark reference rates based on 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 had benchmark rate floors. Assuming no change in the outstanding borrowings on our credit facilities as of December 31, 2023, we estimate that a one percentage point increase in applicable benchmark rates would not have resulted in an impact on our annual interest expense. However, we would be subject to fluctuation in interest rates in the future if we draw down under our senior revolving credit facilities. Assuming no change in the outstanding borrowings on our credit facilities as of December 31, 2022, we estimate that a one percentage point increase in the applicable benchmark rate would have increased our annual interest expense by approximately $14 million. Inflation Risk We believe the inflation experienced in 2022, which is still ongoing, 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. 65 TABLE OF CONTENTS OPENDOOR TECHNOLOGIES INC.