Good afternoon. Welcome to Offerpad's first quarter 2026 Earnings Conference Call. My name is Christine Nguyen, and I will be your conference operator today. At this time, all participant lines have been placed on mute to prevent any background noise. After management's prepared remarks, we will open the call for a question and answer session. If you would like to ask a question, please press star followed by the number one on your telephone keypad. To withdraw your question, press star one again. With that, I will turn the call over to Cortney Read, Offerpad's Vice President of Investor Relations and Communications. Cortney, please go ahead.
Good afternoon. Welcome to Offerpad's first quarter 2026 Earnings Call. During the call today, management will make forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are inherently uncertain. Events could differ significantly from management's expectations. Please refer to the risks, uncertainties, and other factors related to the company's business described in our filings with the U.S. Securities and Exchange Commission. Except as required by applicable law, Offerpad does not intend to update or alter forward-looking statements, whether as a result of new information, future events, or otherwise. On today's call, management will refer to certain non-GAAP financial measures. These metrics exclude certain items discussed in our earnings release and under the heading Non-GAAP Financial Measures.
The reconciliations of Offerpad non-GAAP measures to the comparable GAAP measures are available in the financial tables of the first quarter earnings release on Offerpad's website. With that, I'll turn the call over to Brian Bair, Chairman and Chief Executive Officer.
Thank you, Cortney, and thank you to everyone for joining us. On the call with me today is our Chief Financial Officer, Peter Knag. Offerpad is executing. Over the past two years, we have evolved from a single product company into a multi-solution real estate platform, and that platform is now producing measurable results. Today, that platform includes Cash Offer, Cash Offer Marketplace, Brokerage Services, and Renovate. The macro environment has shifted since our last call. Geopolitical uncertainty has increased, including ongoing conflict in the Middle East, and interest rates have moved higher in response. Transaction volumes remain below historical norms, and affordability continues to limit mobility. For some sellers, this brings uncertainty around timing and proceeds, keeping many on the sidelines.
We continue to refine and enhance our model through diversified revenue streams, multiple solutions, disciplined capital allocation, and AI-driven precision, positioning us to operate effectively in environments like this. While some sellers are still cautious, we are seeing greater stabilization with increased engagement and clearer alignment on pricing and expectations. That shift is supporting improved conversion, and we expect it to remain a tailwind through the remainder of 2026. With all that said, our Cash Offer strategy is not dependent on the macro backdrop changing. We run this business as a capital allocator first and an operator second. Every transaction competes for capital. If it does not meet our return thresholds, we do not transact. Our philosophy is simple: volume follows return, not the other way around.
Throughout 2025, that meant deliberately widening spreads, tightening our buy box, and slowing acquisitions rather than chasing volume into an unstable market. That approach pressured short-term volume, but it strengthened the portfolio and preserved optionality. As we move through 2026, we are deploying capital with the same discipline. The result is a portfolio that is cleaner, fast returning, and better positioned for returns than at any other point in recent history. Our aged inventory, homes beyond their target period of hold time, stands today at less than 30 homes, down from fewer than 60 at the end of quarter four. For remaining homes, we deployed buy-down mortgage rate incentives along with pulling other levers to accelerate movement. In addition, we made an important shift in how we operate.
By moving to a post-inspection offer model, we are entering commitments with greater certainty, which means stronger transaction quality, more efficient capital deployment, and a better experience for sellers. The bigger narrative is what is happening at the top of our funnel. Seller engagement with Offerpad is growing, and more importantly, sellers are finding solutions. Our multi-solution platform means that when a cash offer is not the right fit, we have options ready, the Cash Offer Marketplace or through our Brokerage Services with an agent-led listing path. More sellers are staying in our ecosystem, converting across more pathways and leaving with a solution that works for their situation. Conversion is what we are focused on, the quality and completeness of every seller engagement. That should position us to scale transaction volume with confidence through the remainder of 2026.
A key part of the execution and central to how we move forward is AI. Real estate is a data-intensive, decision-dense industry, and we have spent the last decade building the foundation to do this right. Thousands of transactions, deep market coverage, rich data across pricing, renovations, and homeowner behavior. We believe this is a real operating advantage. With SCOUT and HENRY, we are turning it into a faster, smarter, and more consistent operating model across stages of the transaction. From the moment a seller first engages with Offerpad to the final disposition of properties in our portfolio, AI will be embedded in that decision. That is a fundamentally different way to operate and should be a durable advantage that compounds with every home we touch. Let me start with what it's producing.
From January through March, following the deployment of SCOUT across all operating markets, we saw over a 200 basis point improvement in home contracting rates. Let me explain how. SCOUT is an internally developed AI-powered homeowner intake and routing platform that is being rolled out to better understand our seller intent by cross-referencing seller-provided data with third-party sources, public records, and importantly, our own proprietary transaction history to improve acquisition accuracy and routing decisions before every single offer is made. Looking ahead, we are building SCOUT to make our homeowner intake experience fully dynamic and adaptive in real time by personalizing the seller journey based on the solutions available to them. A seller whose home falls outside of acquisition criteria will not be shown a Cash Offer path.
Instead, they will be routed to the solution that works for them, guided by our customer solutions advisors every step of the way. That capability is in active development and is a core part of how SCOUT scales in 2026. SCOUT also enhances our call center operations with AI-driven conversation analysis, evaluating homeowner interactions in near real time, giving our advisors live coaching and provides leadership visibility into performance trends and customer intent across thousands of conversations each month. Additionally, that intelligence has been extended upstream into our marketing demand generation, improving how we manage spend, optimize performance, and drive efficiency across channels. As a result, cost per qualified lead is down 37% year-over-year. We're reaching more sellers more efficiently in the markets where we can win. Where SCOUT powers the seller journey, HENRY will help govern the asset.
We are expanding HENRY's capabilities throughout 2026, deliberately and in stages. AI-driven property inspection and renovation estimation tools are now live, powered by computer vision models that analyze property images and inspection data to generate renovation cost estimates based on our historical outcomes. Looking ahead, HENRY will guide decisions across renovation scope, listing price, holding time, and overall disposition strategy for every home in the portfolio. A core part of what HENRY will enable is a new segmentation framework that combines macro market dynamics with property-level signals, allowing us to move beyond traditional static pricing approaches. This data-driven model will enhance how we assess demand and liquidity, giving us more consistent and scalable ways to make pricing and acquisition decisions across markets. As we scale this across the platform, it's being designed to improve turn times, strengthen risk management, and drive more disciplined, consistent returns over time.
Together, SCOUT and HENRY are the operating architecture of Offerpad's future that will compound with every transaction we complete. On our last call, I shared more details on our focus with our 4-solution platform. Next, I will go into updates and progress on each. Cash Offer remains our core differentiator. It gives sellers speed, certainty, and flexibility, and it continues to be the foundation of everything we build on top of. In Q1, Cash Offer continued to perform within our underwriting guardrails. With HENRY coming online, we expect our acquisition precision is only going to improve. The Cash Offer Marketplace grew over 60% year-over-year in 2025, and remains one of the most capital efficient revenue streams we operate, generating fee income without balance sheet deployment.
The residential investment landscape may be shifting with regulatory and capital market dynamics continuing to influence how institutional buyers participate in residential real estate. That environment remains fluid, and we are well-positioned by expanding our network designed for depth and durability, diversified across buyer segments, so no single regulatory or market shift could disrupt the channel. Led by Rich Ford, we are executing against that strategy with discipline. As the network matures, we expect the Cash Offer Marketplace to become a meaningful contributor to gross profit in the second half of 2026. Offerpad's Brokerage Services is a core driver of our platform. In quarter one, we referred more qualified sellers to HomePro agents than in all of 2025, and one-third of Cash Offer requests now come through our Agent Partnership Program. This capital-light model expands our reach, lowers acquisition costs, and drives profitability.
Offerpad Renovate broke records nearly every quarter in 2025, and we are raising the bar in 2026. In quarter one, Renovate generated $5.7 million in revenue compared to $5.3 million in quarter one of 2025, continuing to deliver margins of 20%-30% with no balance sheet capital required. Each solution serves a distinct need, generates its own revenue, and strengthens the whole, ensuring more sellers find a path with us. That breadth improves conversion, reduces risk, and keeps more customers in our ecosystem from first touch to close. Our focus remains on building a profitable, scalable business with superior returns on capital and a platform that performs across market cycles. In closing, I want to speak plainly about where we stand and what I believe. I believe we have built a strong home selling platform.
I believe our four solutions give sellers and partners more control, more certainty, and more options than traditional alternatives. I believe the technology we are building in SCOUT and HENRY will make us smarter, faster, and more precise with every single transaction we complete. I believe the people at Offerpad, the team that has worked tirelessly to build this platform, enhance our model, and serve our customers, are among the best in the industry. Our near-term objective remains approximately 1,000 transactions per quarter, the level of which the business reaches Adjusted EBITDA breakeven, and the foundation from which we scale. We are building towards that milestone, and the progress we are making every quarter gives us confidence in that direction. Let me state again, 1,000 transactions per quarter is not the finish line. It's the foundation.
The platform we have built is designed to scale, and as it does, every incremental transaction carries more operating leverage, more data, and more intelligence back into the system. What we have built over the last 2 years is not a set of improvements. It is a fundamentally different operating model. The window to understand what Offerpad is becoming before the market fully reflects it is right now, and I intend to use every day to close that gap. I'll now turn the call over to Peter.
Thank you, Brian. What Brian described is not just a vision. It is already showing up in our financial results. The investments we have made in our platform, our people, and our operating model are translating into measurable progress, and Q1 is evidence of that. We guided to a range of $70 million-$95 million in revenue and 250-300 transactions, and we delivered, generating $80 million in total revenue across 263 transactions in Q1. That consistency matters. It reflects an operating model that is becoming more predictable, more disciplined, and more capable of scaling efficiently. Gross profit was $5.6 million in Q1 2026, resulting in gross margin of 6.9% for the quarter compared to 6.5% in Q1 2025.
As we continue to scale transaction volumes and our mix of fee-based solutions grows, we expect gross margin to improve throughout the remainder of the year. Operating expenses, excluding property selling costs, were $12.2 million, roughly in line with Q4 2025 and down from $16.7 million in Q1 2025. With over $140 million in annualized expenses removed since 2022, our cost base can support significantly higher transaction volumes without proportional overhead growth. That operating leverage is one of the most important drivers of our path to profitability. Adjusted EBITDA loss for the first quarter was $6.7 million, a sequential improvement from Q4 2025 and reflecting continued progress towards our goal of achieving positive Adjusted EBITDA before the end of 2026. We entered Q1 in a position of strength, and we exit in the same way.
At quarter end, total liquidity was over $60 million, reflecting unrestricted cash plus the estimated fair market value of our inventory, including $41 million of unrestricted cash. Our 2026 operating framework, based on current plans and assumptions, does not anticipate requiring incremental equity capital to execute. We have the liquidity, the facilities, and the cost structure to scale within our defined guardrails. I want to address directly what I know is on everyone's mind. Can we reach approximately 1,000 transactions per quarter and return to profitability, and how do we get there? Here is the strategy. We closed Q1 with 263 transactions. That is our baseline. To reach our goal, we need to grow sequentially each quarter, and the drivers of that growth are already in motion. SCOUT is improving conversion rates at the top of the funnel.
Our Cash Offer Marketplace partner network is expanding, routing more homes to more buyers without balance sheet deployment. As Brian stated, Brokerage Services referred more sellers in Q1 alone than in all of 2025. Renovate continues to grow, adding high-margin fee revenue with every project it completes. Our Q2 guidance represents sequential growth of 14%-33% in transactions over Q1. We expect continued sequential improvement in Q3 and Q4 as conversion improves. Based on our current cost structure and expected product mix, we believe approximately 1,000 transactions per quarter represents our path to Adjusted EBITDA breakeven. Every transaction above that threshold is expected to contribute incremental margin to the bottom line. That is the power of the operating leverage we've built. We do not need to add significant overhead to grow.
We need to convert more sellers, and that is exactly what our platform is designed to do. Turning to Q2, we enter the second quarter with a stronger pipeline than we had entering Q1 and continued conversion momentum across the platform. For Q2, we expect 300-350 real estate transactions across Cash Offer, Cash Offer Marketplace, and Brokerage Services, total revenue of $80 million-$90 million, and a narrower Adjusted EBITDA loss compared to Q1, continuing our sequential progression towards positive Adjusted EBITDA before the year-end. Our priorities are clear, and our execution is improving with sequential gains each quarter, a healthier portfolio every month, and a smarter AI system with every transaction. That is how we are building our business to scale. I'm excited by the progress we're seeing and what we're building to drive what comes next.
With that, we'll now take your questions.
Our first question comes from the line of Ryan Tomasello with KBW. Ryan, your line is now open.
Hi, everyone. This is Huan Chong on for Ryan. Thanks for taking the questions. Just taking the midpoint of 2Q's guidance, that $85 million revenue over 325 transactions, that gets us to a revenue per transaction that's about 14% lower than 1Q. Is that just going to be the mix shift? If so, could you help break down how you're thinking about the mix between the products?
Sure. That's right. The mix, the revenue per transaction is a little bit different across the. As you heard in the prepared remarks, we're heavily focused on conversion. That's the most important driver or KPI operationally for us. We historically, very roughly have had a two-thirds, one-third mix between the products. Two-thirds Cash Offer and one-third the other products, including HomePro and Cash Offer Marketplace. Cash Offer, we target around 5% of the home value for gross profit. The Cash Offer Marketplace is similar to that. Then HomePro is lower. HomePro's about.
We split the fee for a traditional real estate listing service with the broker. It tends to be around 1% or 1.5%. As we broaden our product set and increase conversion across these other products, you will see that per transaction figure adjust accordingly.
Okay. Got it. That's clear. On just the top of funnel of home sellers, how has that trended to start the year? Recall that you've previously called out that it's roughly 10K to 20K in any given month. Has that accelerated at all?
Yeah, that's actually stayed very strong, and continuing to even seeing some growth there as well. You know, our marketing team has been really focused on not just bringing in more, you know, more leads or more sellers, but the quality of sellers. We're seeing really strong, engaged sellers that are coming top of funnel. That definitely stayed strong.
Great. Thank you.
Thank you.
Your next question comes from the line of Dae Lee from JP Morgan. Dae Lee, you're live.
All right. Great. Thanks for taking the questions. I wanna go back to the 1,000 per quarter target you guys had out there. I mean, those kind of suggest, like Peter said, a meaningful ramp in the second half to get to that target, and you also have to kind of factor in the seasonality aspect of that. Just curious to hear, like, where, like, the conversion of your platform stands today, and, like, where do you see the opportunity to improve that? Is it on the Cash Offer side? Is it on the other transactions? Is it, like, varied by geography? Just so curiously, could you help us bridge, like, where you are today to the end of the year?
Sure.
how or what gives you the confidence of virtual one proof?
Sure. Thanks for the question, Dae. A couple things that I'd point out. One is we have, you know, while we have historically been a really one product or a little bit, one to two products, now we're three products. Particularly with the addition of the Brokerage Services solution. We're seeing conversion going up based on having additional offers for the top-of-funnel customer and just increasing the likelihood that they choose a solution. Second, 1,000 transactions is we came down intentionally over the, you know, the last couple quarters last year on our Cash Offer volume as we worked on our operations.
We're able to ramp that up just based on the adjustments that we're making and the price point that we're putting out there in our buy box characteristics. We, if you look back in 2024, we were doing almost 800 or 900 transactions per quarter. At our high point a couple years ago, we were doing 1,000 transactions per month, not per quarter. We have high confidence that we can get there.
Yeah. Just a couple things on that as well. With our current volume, it is going to take a conversion increase of 1%-2% a month to make that happen. You know, one of the things that is important is we are able to now serve customers we were not able to serve before with our listing services. For example, if there were homes that were outside of or out of area, out of our buy box, we simply just could not offer on that with a Cash Offer or through our Cash Offer Marketplace. Now, with Brokerage Services, it changes conversion because we can find a solution to them. With our listing services, the customer gets free moving services, home warranties. It is a really strong, compelling product on why to list with one of our HomePros.
That, you know, as we increase conversion, which we're starting to see that now with our different products, and then able to serve customers who weren't before, that's what gives us the confidence towards that 1,000 transactions per quarter.
Okay. Thank you.
Our last question comes from the line of Gaurav Mehta with AGP. Gaurav, your line is now open.
Thanks for taking my question. I wanted to ask you on the thousand transactions and Adjusted EBITDA. Does your Adjusted EBITDA breakeven expectations include renovations in those transactions, or renovations is separate than the transactions?
Hi, Gaurav. I think I heard the question correctly. Does the Adjusted EBITDA include the cost of renovations? Absolutely. It's in there in the Cost of Goods Sold as part of the Cash Offer product. Then separately for the B2B third party Renovate business, it's also in the Cost of Goods Sold.
Okay. No, actually wanted to ask you on the renovation revenue. To get to Adjusted EBITDA, how much renovation revenue growth are you guys?
I see. It is not in the 1,000 transactions. We think of the business, you know, really in two buckets perhaps. One, the customers that are coming to us and are looking to sell their home. We have three products for that, and that's what we are focused around on the 1,000 transactions. That business is a little bit more variable. That's the reason for the focus on 1,000 transactions across those three products. The Renovate business is very consistent and is part of reaching EBITDA and cash flow positive, but it's not part of that 1,000 metric.
It is part of the total financials, of course, and part of the EBITDA. It's growing fairly rapidly, and we expect it to continue to grow.
Okay. Thanks for that color. Second question I have is on the transaction mix. What was the mix between Cash Offer and other services in the current transactions you reported in 1Q? I know in the past you have talked about maybe 50/50 mix as you approach Adjusted EBITDA breakeven. Is that still the expectation?
Yes. In the mix, you can see, on the trending schedules on the IR site, we break out all those details. But the mix has been, as I've mentioned, the mix has been about 1/3, 2/3, 2/3 Cash Offer. Yes, we do expect as we move across the year up towards 1,000 transactions, a larger percentage coming from the other two real estate transaction products.
Yeah. The one thing I'll just add to that as well is our Cash Offer Marketplace, and we continue to add other Cash Offer partners in there as well. The people come to Offerpad because they want a Cash Offer. Doesn't necessarily need to be an Offerpad Cash Offer. We wanna find the best solution for them. In our Cash Offer Marketplace, having short-term hold companies as well as long-term hold companies to find the best customer and the best solution for them on the Cash Offer Marketplace. As we continue to grow towards the 1,000, we're expecting the Cash Offer Marketplace to continue to grow and to ramp as we add more and more, even of the, some of the smaller customers on there.
It's actually good because we help them source by, they can find homes off of our marketplace. Also we're doing the renovation for those groups as well. Offerpad's benefiting from both of those segments.
Okay. Thank you. Maybe one more for me. On the operating expense side, you know, as you ramp up the transactions, do you expect the operating expenses to remain where they are or do you expect any further improvements or any increases on the operating expense side?
Yeah, true, true. If you look on the P&L, right, for this quarter, there's $14.5 million of operating expenses. If you look on the non-GAAP reconciliation table, you can see that there are some selling and holding cost expenses in there. It's around $2 million for this quarter. That small piece of operating expenses as in the GAAP reporting is variable, the large majority of it, which is about $12 million, which we highlighted in the prepared remarks, or $12.5 million, is not variable. In fact, we're there are a few more levers that we're working to pull that are harder than the other cost outs that we've done across the last few years.
We expect that to actually continue to come down, not as dramatically as we have over time. It was, as a couple of years ago, it was as much as $80 million per quarter. Now we're down to $12.5 million or, with the holding costs, $14.5 million. It won't come down too much more, but we expect it to go down, not up.
All right. Thank you. That's all I had.
Thank you.
There are no further questions at this time. This concludes today's call. Thank you for attending. You may now disconnect.