10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission File Number: 001-39641

Offerpad Solutions Inc.

(Exact Name of Registrant as Specified in its Charter)


Delaware	85-2800538
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
2150 E. Germann Road, Suite 1, Chandler, Arizona	85286
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (844) 388-4539

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A common stock, $0.0001 par value per share	OPAD	The New York Stock Exchange
Warrants to purchase Class A common stock, at an exercise price of $11.50 per share	OPADWS	The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 2, 2021, there were 223,528,935 shares of Offerpad’s Class A common stock outstanding and 14,816,236 shares of Offerpad’s Class B common stock outstanding.

OFFERPAD SOLUTIONS INC.

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2021

TABLE OF CONTENTS


		Page
Cautionary Note Regarding Forward-Looking Statements		3
Summary Risk Factors		4

PART I.	FINANCIAL INFORMATION	5
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Operations	7
	Condensed Consolidated Statements of Changes in Temporary Equity and Stockholders’ Equity (Deficit)	8
	Condensed Consolidated Statements of Cash Flows	10
	Notes to Condensed Consolidated Financial Statements	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	46
Item 4.	Controls and Procedures	47

PART II.	OTHER INFORMATION	48

Item 1.	Legal Proceedings	48
Item 1A.	Risk Factors	48
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	74
Item 3.	Defaults Upon Senior Securities	74
Item 4.	Mine Safety Disclosures	74
Item 5.	Other Information	74
Item 6.	Exhibits	75

SIGNATURES		76

Offerpad Solutions Inc. | Third Quarter 2021 Form 10-Q | 2

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q includes statements that express Offerpad Solutions Inc.’s (the “Company,” “Offerpad,” “we,” “us,” or “our”) opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results and therefore are, or may be deemed to be, “forward-looking statements.” These forward-looking statements can generally be identified by the use of forward-looking terminology, including the terms “believes,” “estimates,” “anticipates,” “expects,” “seeks,” “projects,” “intends,” “plans,” “may” or “should” or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They may appear in a number of places throughout this Quarterly Report on Form 10-Q, including Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Part II, Item 1A, “Risk Factors,” and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our future results of operations, financial condition and liquidity; our prospects, growth, strategies and the markets in which Offerpad operates. Such forward-looking statements are based on available current market material and management’s expectations, beliefs and forecasts concerning future events impacting Offerpad. Factors that may impact such forward-looking statements include:



its ability to respond to general economic conditions;



the health of the U.S. residential real estate industry;



its ability to grow market share in its existing markets or any new markets it may enter;



the impact of the COVID-19 pandemic;



its ability to manage its growth effectively;



its ability to accurately value and manage inventory, and to maintain an adequate and desirable supply of inventory;



its ability to successfully launch new product and service offerings, and to manage, develop and refine its technology platform;



its ability to maintain and enhance its products and brand, and to attract customers;



its ability to achieve and maintain profitability in the future; and



the success of strategic relationships with third parties.

The foregoing list of factors is not exhaustive. You should carefully consider the foregoing factors and the other risks and uncertainties described in the “Risk Factors” section of this Quarterly Report on Form 10-Q and the other documents filed by us from time to time with the SEC. The forward-looking statements contained in this Quarterly Report on Form 10-Q are based on current expectations and beliefs concerning future developments and their potential effects on us and our business. There can be no assurance that future developments affecting us will be those that we have anticipated. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

Offerpad Solutions Inc. | Third Quarter 2021 Form 10-Q | 3

Summary Risk Factors

Our business is subject to numerous risks and uncertainties, including those described in Part II. Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q. You should carefully consider these risks and uncertainties when investing in our securities. The principal risks and uncertainties affecting our business include the following:



Our business and operating results may be significantly impacted by a number of factors, including general economic conditions, local or regional conditions in the markets in which we operate, the health of the U.S. residential real estate industry and governmental actions that impact us, risks associated with our real estate assets and the COVID-19 pandemic and attempts to contain it;



Our limited operating history makes it difficult to evaluate our current business and future prospects and the risk of your investment;



We operate in a competitive and fragmented industry, and we may not be successful in attracting customers for our products and services or in competing effectively through management of our products or services, including home renovations, which could harm our business, results of operations and financial condition;



We have experienced rapid growth since inception, which may not be indicative of future growth, and, if we continue to grow rapidly, we may experience difficulties in managing our growth and expanding our operations and service offerings;



Our business model and growth strategy depend on our marketing efforts and ability to maintain our brand and attract customers to our platform in a cost-effective manner;



We may be unsuccessful in launching or marketing new products or services, or launching existing products and services into new markets, or may be unable to successfully integrate new offerings into our existing platform, which would result in significant expense and may not achieve desired results;



We have a history of losses since inception, and we may not achieve or maintain profitability in the future;



Our business is dependent upon our ability to acquire, accurately value and manage inventory and any decrease in availability of inventory, an ineffective pricing or portfolio management strategy, inaccurate information from prospective sellers or buyers with respect to their homes or ineffective home inspections may have an adverse effect on our business, sales and results of operations;



Prospective sellers and buyers of homes may choose not to transact online, which could harm our growth prospects;



Our internal information technology systems may fail or suffer security breaches, loss or leakage of data, and other disruptions, which could disrupt our business or result in the loss of critical and confidential information;



We process, store and use personal information and other data, which subjects us to governmental regulation and other legal obligations related to privacy, and violation of these privacy obligations could result in a claim for damages, regulatory action, loss of business, or unfavorable publicity;



Our ability to compete depends in part on protecting our intellectual property and other propriety information and on maintaining necessary intellectual property licenses;



We operate in a highly regulated industry and are subject to a wide range of federal, state and local laws, rules and regulations, including licensing and conduct requirements relating to our real estate brokers and brokerage-related businesses and mortgage products;



We utilize a significant amount of indebtedness in the operation of our business, and so our cash flows and operating results could be adversely affected by required payments of debt or related interest and other risks of our debt financing;



We rely on agreements with third parties to finance our business; and



We face risks relating to our capital structure, including the potential impact of our multi-class structure.

Offerpad Solutions Inc. | Third Quarter 2021 Form 10-Q | 4

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

OFFERPAD SOLUTIONS INC.

Condensed Consolidated Balance Sheets

(in thousands, except par value per share, unaudited)


		September 30,			December 31,
		2021			2020
ASSETS
Current assets:
Cash and cash equivalents		$	116,634		$	43,938
Restricted cash			20,024			6,804
Accounts receivable			10,038			2,309
Inventory			902,062			171,359
Prepaid expenses and other current assets			10,453			2,880
Total current assets			1,059,211			227,290
Property and equipment, net			9,556			8,231
Other non-current assets			193			352
TOTAL ASSETS	(1)	$	1,068,960		$	235,873
LIABILITIES, TEMPORARY EQUITY, AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable		$	6,126		$	2,149
Accrued liabilities			28,354			11,181
Secured credit facilities and notes payable			509,833			50,143
Secured credit facilities and notes payable, net - related party			241,208			126,825
Total current liabilities			785,521			190,298
Secured credit facilities and notes payable, net of current portion			—			4,710
Warrant liabilities			39,711			—
Total liabilities	(2)		825,232			195,008
Commitments and contingencies (Note 16)
Temporary equity:
Series A convertible preferred stock, zero and 21,011 shares authorized, respectively; zero and 20,907 shares issued and outstanding, respectively; liquidation preference of $0 and $15,099, respectively			—			14,921
Series A-1 convertible preferred stock, zero and 10,905 shares authorized, issued and outstanding, respectively; liquidation preference of $0 and $7,500, respectively			—			7,470
Series A-2 convertible preferred stock, zero and 8,322 shares authorized, issued and outstanding, respectively; liquidation preference of $0 and $7,500, respectively			—			7,463
Series B convertible preferred stock, zero and 58,390 shares authorized, issued and outstanding, respectively; liquidation preference of $0 and $50,000, respectively			—			49,845
Series C convertible preferred stock, zero and 56,716 shares authorized, respectively; zero and 39,985 shares issued and outstanding, respectively; liquidation preference of $0 and $105,750, respectively			—			104,424
Total temporary equity			—			184,123
Stockholders’ equity (deficit):
Class A common stock, $0.0001 and $0.00001 par value, respectively; 2,000,000 and 256,694 shares authorized, respectively; 223,529 and 57,865 shares issued and outstanding, respectively			22			—
Class B common stock, $0.0001 and zero par value, respectively; 20,000 and zero shares authorized, respectively; 14,816 and zero shares issued and outstanding, respectively			2			—
Additional paid in capital			388,566			5,908
Accumulated deficit			(144,862	)		(138,516	)
Treasury stock			—			(10,650	)
Total stockholders’ equity (deficit)			243,728			(143,258	)
TOTAL LIABILITIES, TEMPORARY EQUITY, AND STOCKHOLDERS’ EQUITY (DEFICIT)		$	1,068,960		$	235,873

(1)

Our consolidated assets as of September 30, 2021 and December 31, 2020 include the following assets of certain variable interest entities (“VIEs”) that can only be used to settle the liabilities of those VIEs: Restricted cash, $20,024 and $6,804; Accounts receivable, $8,345 and $1,638; Inventory, $900,283 and $171,212; Prepaid expenses and other current assets, $2,879 and $1,036; Property and equipment, net, $4,377 and $2,772; Total assets of $935,908 and $183,462, respectively.

Offerpad Solutions Inc. | Third Quarter 2021 Form 10-Q | 5

(2)

Our consolidated liabilities as of September 30, 2021 and December 31, 2020 include the following liabilities for which the VIE creditors do not have recourse to Offerpad: Accounts payable, $4,561 and $716; Accrued liabilities, $2,442 and $575; Current portion of secured credit facilities and notes payable, net, $751,041 and $173,539; Noncurrent portion of secured credit facilities and notes payable, net, $0 and $653; Total liabilities, $758,044 and $175,483, respectively.

The accompanying notes are an integral part of these condensed consolidated financial statements.

Offerpad Solutions Inc. | Third Quarter 2021 Form 10-Q | 6

OFFERPAD SOLUTIONS INC.

Condensed Consolidated Statements of Operations

(in thousands, except per share data, unaudited)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
Revenue	$	540,287		$	186,365		$	1,202,906		$	841,027
Cost of revenue		487,165			166,600			1,065,383			778,503
Gross profit		53,122			19,765			137,523			62,524
Operating expenses:
Sales, marketing and operating		38,727			16,072			95,398			59,048
General and administrative		8,160			3,981			18,031			12,204
Technology and development		2,777			1,633			7,663			5,454
Total operating expenses		49,664			21,686			121,092			76,706
Income (loss) from operations		3,458			(1,921	)		16,431			(14,182	)
Other income (expense):
Change in fair value of warrant liabilities		(13,185	)		—			(13,185	)		—
Interest expense		(5,495	)		(1,312	)		(9,670	)		(8,404	)
Other income, net		—			289			248			787
Total other expense		(18,680	)		(1,023	)		(22,607	)		(7,617	)
Loss before income taxes		(15,222	)		(2,944	)		(6,176	)		(21,799	)
Income tax expense		(81	)		—			(170	)		—
Net loss	$	(15,303	)	$	(2,944	)	$	(6,346	)	$	(21,799	)
Net loss per share, basic	$	(0.13	)	$	(0.05	)	$	(0.08	)	$	(0.38	)
Net loss per share, diluted	$	(0.13	)	$	(0.05	)	$	(0.08	)	$	(0.38	)
Weighted average common shares outstanding, basic		115,985			57,865			78,191			57,865
Weighted average common shares outstanding, diluted		115,985			57,865			78,191			57,865

The accompanying notes are an integral part of these condensed consolidated financial statements.

Offerpad Solutions Inc. | Third Quarter 2021 Form 10-Q | 7

OFFERPAD SOLUTIONS INC.

Condensed Consolidated Statements of Changes in Temporary Equity and Stockholders’ Equity (Deficit)

(in thousands, unaudited)


	Temporary Equity																																	Stockholders’ (Deficit) Equity
	Series A Convertible Preferred Stock						Series A-1 Convertible Preferred Stock						Series A-2 Convertible Preferred Stock						Series B Convertible Preferred Stock						Series C Convertible Preferred Stock						Total Temporary			Common Stock				Additional Paid in		Accumulated			Treasury Stock						Total Stockholders’ (Deficit)
	Shares			Amount			Shares			Amount			Shares			Amount			Shares			Amount			Shares			Amount			Equity			Shares		Amount		Capital		Deficit			Shares			Amount			Equity
Balance at June 30, 2021		2,775		$	14,921			1,448		$	7,470			1,105		$	7,463			7,751		$	49,845			5,308		$	104,424		$	184,123			7,920	$	—	$	7,653	$	(129,559	)		636		$	(10,650	)	$	(132,556	)
Retroactive conversion of shares due to Business Combination		18,132			—			9,457			—			7,217			—			50,639			—			34,677			—			—			51,740		—		—		—			4,158			—			—
Balance at June 30, 2021, as converted		20,907			14,921			10,905			7,470			8,322			7,463			58,390			49,845			39,985			104,424			184,123			59,660		—		7,653		(129,559	)		4,794			(10,650	)		(132,556	)
Vesting of early exercised stock options		—			—			—			—			—			—			—			—			—			—			—			—		—		64		—			—			—			64
Conversion of preferred stock to common stock		(20,907	)		(14,921	)		(10,905	)		(7,470	)		(8,322	)		(7,463	)		(58,390	)		(49,845	)		(39,985	)		(104,424	)		(184,123	)		138,612		14		184,109		—			—			—			184,123
Issuance of Class A common stock and Class B common stock in connection with Business Combination		—			—			—			—			—			—			—			—			—			—			—			40,073		10		195,687		—			(4,794	)		10,650			206,347
Stock-based compensation expense		—			—			—			—			—			—			—			—			—			—			—			—		—		1,053		—			—			—			1,053
Net loss		—			—			—			—			—			—			—			—			—			—			—			—		—		—		(15,303	)		—			—			(15,303	)
Balance at September 30, 2021		—		$	—			—		$	—			—		$	—			—		$	—			—		$	—		$	—			238,345	$	24	$	388,566	$	(144,862	)		—		$	—		$	243,728


	Temporary Equity																																	Stockholders’ Deficit
	Series A Convertible Preferred Stock						Series A-1 Convertible Preferred Stock						Series A-2 Convertible Preferred Stock						Series B Convertible Preferred Stock						Series C Convertible Preferred Stock						Total Temporary			Common Stock				Additional Paid in		Accumulated			Treasury Stock						Total Stockholders’
	Shares			Amount			Shares			Amount			Shares			Amount			Shares			Amount			Shares			Amount			Equity			Shares		Amount		Capital		Deficit			Shares			Amount			Deficit
Balance at June 30, 2020		2,775		$