Filed by Supernova Partners Acquisition Company, Inc.

pursuant to Rule 425 under the Securities Act of 1933

and deemed filed pursuant to Rule 14a-12

under the Securities Exchange Act of 1934

Subject Company:

Supernova Partners Acquisition Company, Inc. (SEC File No.: 001-39641)

Date: August 16, 2021

On March 17, 2021, Supernova Partners Acquisition Company, Inc., a Delaware corporation (“Supernova”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among Supernova, Orchids Merger Sub, Inc., a Delaware corporation and direct, wholly owned subsidiary of Supernova, Orchids Merger Sub, LLC, a Delaware limited liability company and direct, wholly owned subsidiary of Supernova, and OfferPad, Inc., a Delaware corporation (“Offerpad”) relating to a proposed business combination transaction (the “Business Combination”).

On August 16, 2021, Offerpad issued the following press release to announce, among other things, its results for the second quarter 2021. Offerpad also announces that it has borrowed a principal amount of $25.0 million from a related party on substantially the same terms pursuant to which it previously borrowed a principal amount of $30.0 million as described in the proxy statement/prospectus relating to the Business Combination. Offerpad will use the loan to help continue to fund its ongoing operations through the consummation of the Business Combination. Offerpad currently expects to repay the principal amount of both loans, together with all accrued but unpaid interest, in connection with the consummation of the Business Combination.

Additional Information and Where to Find It

Supernova has filed a registration statement on Form S-4 with the SEC, which includes a proxy statement/prospectus, that is both the proxy statement that is being distributed to holders of Supernova’s common stock in connection with its solicitation of proxies for the vote by Supernova’s stockholders with respect to the proposed business combination and other matters as described in the registration statement, as well as the prospectus relating to the offer and sale of the securities to be issued in the business combination. Supernova is mailing the definitive proxy statement/prospectus and other relevant documents to its stockholders. This filing does not contain all the information that should be considered concerning the proposed business combination and is not intended to form the basis of any investment decision or any other decision in respect of the business combination. Supernova’s stockholders and other interested persons are advised to read the preliminary proxy statement/prospectus included in the registration statement and the amendments thereto and the definitive proxy statement/prospectus and other documents filed in connection with the proposed business combination, as these materials will contain important information about Offerpad, Supernova and the business combination. Stockholders are also able to obtain copies of the definitive proxy statement and other documents filed with the SEC, without charge at the SEC’s website at www.sec.gov, or by directing a request to Supernova’s secretary at 4301 50th Street NW, Suite 300 PMB 1044, Washington, D.C. 20016, (202) 918-7050.

Participants in the Solicitation

Supernova, Offerpad, and their respective directors and executive officers may be deemed participants in the solicitation of proxies from Supernova’s stockholders with respect to the proposed business combination. A list of the names of those directors and executive officers and a description of their interests is contained in Supernova’s registration statement on Form S-4, which is available free of charge at the SEC’s website at www.sec.gov. To the extent such holdings of Supernova’s securities by Supernova’s directors and executive officers may have changed since that time, such changes have been or will be reflected on Statements of Change in Ownership on Form 4 filed with the SEC.


LOGO

Offerpad Reports Record Revenue and Profit for Second Quarter 2021;

Provides 2021 Full-Year Outlook

Company posts profitable Q2; grows acquisitions 340% in tight real estate market

Second Quarter 2021 Highlights – compared with the prior-year second quarter:

 

   

Revenue increased 32% to $378.6 million

 

   

Fully diluted earnings per share were $0.31, marking the first profitable quarter in company history

 

   

Net income improved to $9.2 million, an increase of $16.6 million

 

   

Adjusted EBITDA increased $16.8 million to a record $13.1 million

 

   

Gross profit increased $33.0 million to $50.9 million, or 13.4% of revenue

 

   

Contribution profit after interest per home sold increased to $31,500 from $1,400

 

   

Acquired a record 2,025 homes, up from 460

 

   

Business combination with Supernova Partners Acquisition Company expected to close in the third quarter of 2021

CHANDLER, Ariz. – August 16, 2021 – Offerpad, Inc. (“Offerpad”), a leading tech-enabled platform for buying and selling residential real estate, today reported financial results for its second quarter ended June 30, 2021.

“Offerpad performed exceptionally well this quarter and posted our first quarterly profit,” said Brian Bair, CEO and founder of Offerpad. “For consumers, the nearly $2 trillion U.S. residential real estate market remains fractured, time consuming, stressful and expensive. Consumers want and expect a fast, easy, and seamless online experience when buying and selling a home. At Offerpad, we distinguish ourselves as an incredibly adaptable, customer-centric company that has proven our ability to grow and excel in all types of market conditions. To succeed in this industry, you need a combination of proprietary technology, home underwriting accuracy, and renovation excellence. Our unique expertise combining technology development and real estate transaction experience allows us to operate at the most efficient level in the market.

“We’re thrilled with the record number of acquisitions and the extraordinary contribution margin we achieved in the second quarter. At Offerpad, we celebrate the wins, such as our performance this quarter, while also staying focused on keeping our business model adaptable. For the balance of the year, we expect continued growth and high customer satisfaction levels as we further our mission to provide the best way to buy and sell a home.”

Q2 Financial Highlights

 

     Q2 2021    Q2 2020    Percentage Change

Revenue

   $378.6 million    $287.0 million    31.9%

Homes sold

   1,259    1,166    8.0%

Homes acquired

   2,025    460    340.2%

Gross profit

   $50.9 million    $17.9 million    184.8%

Net income (loss)

   $9.2 million    ($7.4) million    N. A.

Adjusted EBITDA

   $13.1 million    ($3.7) million    N. A.

Contribution profit after interest per home sold

   $31,500    $1,400    2,093.3%

“Our results this quarter were driven by our continued focus on operational excellence, our ability to match the right services with the right consumers, as well as favorable market conditions,” said Mike Burnett CFO of Offerpad. “Our operational performance was particularly strong, with a total contribution profit after interest of $39.7 million, bringing the year-to-date total for the first two


quarters of 2021 to $63.2 million, surpassing our internal projections for full year 2021. We continued to prove our scalability and adaptability, acquiring a record 2,025 homes in the second quarter and completing our first 24-hour close on a home. Our second quarter results demonstrated Offerpad’s significant business momentum as we executed well on both our market penetration and expansion strategy, setting ourselves up for a strong second half of the year,” continued Burnett. “We expect to continue to drive expansion into additional new markets for the balance of the year, having recently announced that we will be entering Columbia, South Carolina, Columbus, Ohio, St. Louis and Kansas City.”

Third Quarter and Full Year 2021 Outlook

Based on the favorable results in the first half of the year, Offerpad is providing its full year outlook for 2021 as follows:

 

    

2021 Outlook

   2020    Percentage Change

Homes Sold

   5,612 - 6,000    4,281    31% - 40%

Revenue

   $1.7 billion - $1.85 billion    $1.1 billion    60% - 74%

Gross Profit

   $170 million - $180 million    $88 million    94% -105%

Adjusted EBITDA

   ($15) million - ($6) million    ($8.2) million    N.A.

Additionally, for the third quarter of 2021, revenue is expected to be between $460 million and $520 million, which represents a sequential growth rate of 29% over the second quarter of 2021 at the midpoint of the range, and adjusted EBITDA is expected to be between ($15) million and ($8.5) million.

Conference Call and Webcast Details

Offerpad founder and CEO Brian Bair and CFO Mike Burnett will host a live conference call and accompanying webcast on August 16, 2021, at 2 p.m. PST / 5 p.m. EST. Registration for the conference call can be completed here, and participants will receive a personalized dial in and PIN to access the call. The webcast is available to the public and can be accessed on Offerpad’s Investor Relations website at https://investor.offerpad.com/events-and-presentations. All participants are encouraged to register for the event, or access the website 10 minutes before the start of the live event. Access to a replay of the webcast will be available from the same website address after the live webcast concludes.

About Offerpad

Offerpad’s mission is to provide the best way to buy and sell a home. Period. We use technology-enabled solutions to remake the home selling and buying experience by offering customers the convenience, control and certainty to solve their housing needs. We combine our fundamental real estate expertise with our data-driven digital “Solutions Center” platform to give users a holistic, customer-centric experience, enabling them to efficiently sell and buy their homes online with streamlined access to other services including mortgage, listing, and buyer representation services.

Contacts

Investors

James Grout

Investors@offerpad.com

602-706-4905

Media

Laura Collins

480-220-0021

David Stephan

951-970-6336

Press@Offerpad.com

Forward-Looking Statements

Certain statements in this press release may be considered forward-looking statements. Forward-looking statements generally relate to future events or Offerpad’s future financial or operating performance. For example, statements regarding Offerpad’s outlook for the third quarter and full year 2021, anticipated growth in the industry in which Offerpad operates, and the anticipated


timing of the proposed business combination, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “pro forma,” “may,” “should,” “could,” “might,” “plan,” “possible,” “project,” “strive,” “budget,” “forecast,” “expect,” “intend,” “will,” “estimate, ””anticipate,” “believe,” “predict,” “potential” or “continue,” or the negatives of these terms or variations of them or similar terminology. Such forward-looking statements are subject to risks, uncertainties, and other factors which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These forward-looking statements are based upon estimates and assumptions that, while considered reasonable by Offerpad and its management, are inherently uncertain. Factors that may cause actual results to differ materially from current expectations include, but are not limited to: the outcome of any legal proceedings that may be instituted against Supernova, Offerpad, the combined company or others following the announcement of the business combination and any definitive agreements with respect thereto; the inability to complete the business combination due to the failure to obtain approval of the stockholders of Supernova or to satisfy other conditions to closing; changes to the proposed structure of the business combination that may be required or appropriate as a result of applicable laws or regulations or as a condition to obtaining regulatory approval of the business combination; the ability to meet stock exchange listing standards following the consummation of the business combination; the risk that the business combination disrupts current plans and operations of Offerpad as a result of the announcement and consummation of the business combination; the ability to recognize the anticipated benefits of the business combination, which may be affected by, among other things, competition, the ability of the combined company to grow and manage growth profitably, maintain relationships with customers and suppliers and retain its management and key employees; costs related to the business combination; changes in applicable laws or regulations; the ability to respond to general economic conditions; the health of the U.S. residential real estate industry; the ability to grow market share in existing markets or any new markets; the impact of the COVID-19 pandemic; the ability to manage growth effectively; the ability to accurately value and manage inventory, and to maintain an adequate and desirable supply of inventory; the ability to successfully launch new product and service offerings, and to manage, develop and refine the technology platform; and other risks and uncertainties set forth in the sections entitled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” in the registration statement on Form S-4 and proxy statement/prospectus discussed below and other documents filed by Supernova from time to time with the Securities and Exchange Commission (the “SEC”).

Nothing in this press release should be regarded as a representation by any person that the forward-looking statements set forth herein will be achieved or that any of the contemplated results of such forward-looking statements will be achieved. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. Offerpad does not undertake any duty to update these forward-looking statements.

Additional Information and Where to Find It

Supernova has filed a registration statement on Form S-4 with the SEC, which includes a proxy statement/prospectus, that is both the proxy statement that is being distributed to holders of Supernova’s common stock in connection with its solicitation of proxies for the vote by Supernova’s stockholders with respect to the proposed business combination and other matters as described in the registration statement, as well as the prospectus relating to the offer and sale of the securities to be issued in the business combination. Supernova is mailing the definitive proxy statement/prospectus and other relevant documents to its stockholders. This press release does not contain all the information that should be considered concerning the proposed business combination and is not intended to form the basis of any investment decision or any other decision in respect of the business combination. Supernova’s stockholders and other interested persons are advised to read the preliminary proxy statement/prospectus included in the registration statement and the amendments thereto and the definitive proxy statement/prospectus and other documents filed in connection with the proposed business combination, as these materials will contain important information about Offerpad, Supernova and the business combination. Stockholders are also able to obtain copies of the definitive proxy statement and other documents filed with the SEC, without charge at the SEC’s website at www.sec.gov, or by directing a request to Supernova’s secretary at 4301 50th Street NW, Suite 300 PMB 1044, Washington, D.C. 20016, (202) 918-7050.

Participants in the Solicitation

Supernova, Offerpad, and their respective directors and executive officers may be deemed participants in the solicitation of proxies from Supernova’s stockholders with respect to the proposed business combination. A list of the names of those directors and executive officers and a description of their interests is contained in Supernova’s registration statement on Form S-4, which is available free of charge at the SEC’s website at www.sec.gov. To the extent such holdings of Supernova’s securities by Supernova’s directors and executive officers may have changed since that time, such changes have been or will be reflected on Statements of Change in Ownership on Form 4 filed with the SEC.


No Offer or Solicitation

This press release does not constitute (i) a solicitation of a proxy, consent or authorization with respect to any securities or in respect of the proposed business combination or (ii) an offer to sell, a solicitation of an offer to buy, or a recommendation to purchase any security of Supernova, Offerpad, or any of their respective affiliates.


OFFERPAD, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data, unaudited)

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2021     2020     2021     2020  

Revenue

   $ 378,647     $ 287,007     $ 662,619     $ 654,662  

Cost of revenue

     327,783       269,146       578,218       611,903  
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     50,864       17,861       84,401       42,759  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

        

Sales, marketing and operating

     31,595       17,547       56,671       42,976  

General and administrative

     5,137       3,862       9,871       8,223  

Technology and development

     2,603       1,692       4,886       3,821  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     39,335       23,101       71,428       55,020  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Income (loss) from operations

     11,529       (5,240     12,973       (12,261
  

 

 

   

 

 

   

 

 

   

 

 

 

Other income (expense):

        

Interest expense

     (2,257     (2,418     (4,175     (7,092

Other income, net

     7       268       248       498  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other expense

     (2,250     (2,150     (3,927     (6,594
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Income (loss) before income taxes

     9,279       (7,390     9,046       (18,855

Income tax expense

     (89     —         (89     —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Income (loss)

   $ 9,190     $ (7,390   $ 8,957     $ (18,855
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Income (loss) per share, basic

   $ 1.17     $ (0.96   $ 1.14     $ (2.45
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Income (loss) per share, diluted

   $ 0.31     $ (0.96   $ 0.30     $ (2.45
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average common shares outstanding, basic

     7,884       7,682       7,830       7,682  
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average common shares outstanding, diluted

     29,796       7,682       29,748       7,682  
  

 

 

   

 

 

   

 

 

   

 

 

 


OFFERPAD, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

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

 

     June 30,      December 31,  
     2021      2020  

ASSETS

     

Current Assets:

     

Cash and cash equivalents

   $ 44,560      $ 43,938  

Restricted cash

     13,341        6,804  

Accounts receivable

     7,117        2,309  

Inventory

     482,860        171,359  

Prepaid expenses and other current assets

     13,217        2,880  
  

 

 

    

 

 

 

Total current assets

     561,095        227,290  

Property and equipment, net

     12,110        8,231  

Other non-current assets

     122        352  
  

 

 

    

 

 

 

TOTAL ASSETS

   $ 573,327      $ 235,873  
  

 

 

    

 

 

 

LIABILITIES, TEMPORARY EQUITY, AND STOCKHOLDERS’ DEFICIT

     

Current Liabilities:

     

Accounts payable

   $ 5,302      $ 2,149  

Accrued liabilities

     26,606        11,181  

Secured credit facilities and notes payable, net—related party

     255,344        126,825  

Secured credit facilities and notes payable

     234,508        50,143  
  

 

 

    

 

 

 

Total current liabilities

     521,760        190,298  

Secured credit facilities and notes payable, net of current portion

     —          4,710  
  

 

 

    

 

 

 

Total liabilities

     521,760        195,008  
  

 

 

    

 

 

 

Commitments and Contingencies

     

Temporary Equity:

     

Series A convertible preferred stock, 2,789 shares authorized at June 30, 2021 and December 31, 2020; 2,775 shares issued and outstanding at June 30, 2021 and December 31, 2020; liquidation preference of $15,099 at June 30, 2021 and December 31, 2020

     14,921        14,921  

Series A-1 convertible preferred stock, 1,448 shares authorized, issued and outstanding at June 30, 2021 and December 31, 2020; liquidation preference of $7,500 at June 30, 2021 and December 31, 2020

     7,470        7,470  

Series A-2 convertible preferred stock, 1,105 shares authorized, issued and outstanding at June 30, 2021 and December 31, 2020; liquidation preference of $7,500 at June 30, 2021 and December 31, 2020

     7,463        7,463  

Series B convertible preferred stock, 7,751 shares authorized, issued and outstanding at June 30, 2021 and December 31, 2020; liquidation preference of $50,000 at June 30, 2021 and December 31, 2020

     49,845        49,845  

Series C convertible preferred stock, 7,529 shares authorized at June 30, 2021 and December 31, 2020; 5,308 shares issued and outstanding at June 30, 2021 and December 31, 2020; liquidation preference of $105,750 at June 30, 2021 and December 31, 2020

     104,424        104,424  
  

 

 

    

 

 

 

Total temporary equity

     184,123        184,123  
  

 

 

    

 

 

 


Stockholders’ Deficit:

    

Common stock, 34,077 shares authorized at June 30, 2021 and December 31, 2020; $0.00001 par value; 7,920 and 7,682 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively

     —         —    

Additional paid in capital

     7,653       5,908  

Accumulated deficit

     (129,559     (138,516

Treasury stock

     (10,650     (10,650
  

 

 

   

 

 

 

Total stockholders’ deficit

     (132,556     (143,258
  

 

 

   

 

 

 

TOTAL LIABILITIES, TEMPORARY EQUITY, AND STOCKHOLDERS’ DEFICIT

   $ 573,327     $ 235,873  
  

 

 

   

 

 

 


OFFERPAD, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)

 

     Six Months Ended  
     June 30,  
     2021     2020  

Cash flows from operating activities:

    

Net Income (loss)

   $ 8,957     $ (18,855

Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:

    

Depreciation

     277       204  

Gain on sale

     (246     —    

Amortization of debt financing costs

     209       89  

Impairment of inventory

     339       2,908  

Stock-based compensation

     1,263       538  

Changes in operating assets and liabilities:

    

Accounts receivable

     (4,808     (497

Inventory

     (311,840     219,505  

Prepaid expenses and other current assets

     (10,108     764  

Accounts payable

     3,153       650  

Accrued liabilities

     15,274       (2,346
  

 

 

   

 

 

 

Net cash (used in) provided by operating activities

     (297,530     202,960  
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Purchases of property and equipment

     (5,942     (11

Proceeds from sales of property and equipment

     2,032       —    
  

 

 

   

 

 

 

Net cash used in investing activities

     (3,910     (11
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Borrowings from credit facilities and notes payable

     888,970       395,455  

Repayments of credit facilities and notes payable

     (580,819     (608,781

Payment of debt financing costs

     (185     (356

Proceeds from issuance of Class C preferred stock, net

           29,823  

Proceeds from exercise of stock options

     633        
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     308,599       (183,859
  

 

 

   

 

 

 

Net change in cash, cash equivalents and restricted cash

     7,159       19,090  

Cash, cash equivalents and restricted cash, beginning of period

     50,742       29,883  
  

 

 

   

 

 

 

Cash, cash equivalents and restricted cash, end of period

   $ 57,901     $ 48,973  
  

 

 

   

 

 

 

Reconciliation of cash, cash equivalents and restricted cash to the consolidated balance sheet:

    

Cash and cash equivalents

   $ 44,560     $ 43,785  

Restricted cash

     13,341       5,188  
  

 

 

   

 

 

 

Total cash, cash equivalents and restricted cash

   $ 57,901     $ 48,973  
  

 

 

   

 

 

 

Supplemental disclosure of cash flow information:

    

Cash payments for interest

   $ 5,537     $ 9,919  
  

 

 

   

 

 

 


Non-GAAP Financial Measures

In addition to Offerpad’s results of operations above, Offerpad’s management utilizes certain financial measures that are not required by, or presented in accordance with, U.S. generally accepted accounting principles (“GAAP”). These measures have limitations as analytical tools when assessing Offerpad’s operating performance and should not be considered in isolation or as a substitute for GAAP measures, including gross profit and net income.

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

Offerpad has not provided a quantitative reconciliation of forecasted Adjusted EBITDA to forecasted net income (loss) within this press release because Offerpad is unable to calculate certain reconciling items without making unreasonable efforts. These items, which include, but are not limited to, stock-based compensation with respect to future grants and forfeitures, could materially affect the computation of forward-looking net income (loss), are inherently uncertain and depend on various factors, some of which are outside of Offerpad’s control.

Adjusted gross profit, contribution profit, and contribution profit after interest (and related margins)

Offerpad believes that adjusted gross profit, contribution profit, and contribution profit after interest are useful financial measures for investors as they are used by management in evaluating unit level economics and operating performance across its markets. Each of these measures is intended to present the economics related to homes sold during a given period. Offerpad does so by including revenue generated from homes sold (and ancillary services) in the period and only the expenses that are directly attributable to such home sales, even if such expenses were recognized in prior periods, and excluding expenses related to homes that remain in inventory as of the end of the period presented. Contribution profit provides investors a measure to assess Offerpad’s ability to generate returns on homes sold during a reporting period after considering home acquisition costs, renovation and repair costs, and adjusting for holding costs and selling costs. Contribution profit after interest further impacts gross profit by including interest costs (including senior and mezzanine secured credit facilities) attributable to homes sold during a reporting period. Offerpad believes 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 presented period.

Adjusted gross profit, contribution profit and contribution profit after interest (and related margins) are supplemental measures of Offerpad’s 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. Accordingly, these measures should not be considered in isolation or as a substitute for analysis of Offerpad’s results as reported under GAAP. Offerpad includes a reconciliation of these measures to the most directly comparable GAAP financial measure, which is gross profit.

Adjusted gross profit / margin

Offerpad calculates adjusted gross profit as gross profit under GAAP adjusted for (1) net inventory impairment plus (2) interest expense associated with homes sold in the presented period and recorded in cost of revenue. Net inventory impairment is calculated by adding back the inventory impairment charges recorded during the period on homes that remain in inventory at period end and subtracting the inventory impairment charges recorded in prior periods on homes sold in the current period. Offerpad defines adjusted gross margin as adjusted gross profit as a percentage of revenue.

Offerpad views 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. Adjusted gross profit helps management assess performance across the key phases of processing a home (acquisitions, renovations, and resale) for a specific resale cohort.

Contribution profit / margin

Offerpad calculates contribution profit as adjusted gross profit, minus (1) direct selling costs incurred on homes sold during the presented period, minus (2) holding costs incurred in the current period on homes sold during the period recorded in sales, marketing, and operating, minus (3) holding costs incurred in prior periods on homes sold in the current period recorded in sales,


marketing, and operating, plus (4) other income which historically is primarily comprised of net income to us from the investment related to Offerpad’s OPHL operations. The composition of Offerpad’s holding costs is described in the footnotes to the reconciliation table below. Offerpad defines contribution margin as contribution profit as a percentage of revenue.

Offerpad views this metric as an important measure of business performance as it captures the unit level performance isolated to homes sold in a given period and provides comparability across reporting periods. Contribution profit helps management assess inflows and outflow directly associated with a specific resale cohort.

Contribution profit / margin after interest

Offerpad defines contribution profit after interest as contribution profit, minus (1) interest expense associated with homes sold in the presented period and recorded in cost of revenue, minus (2) interest expense associated with homes sold in the presented period, recorded in costs of sales, and previously excluded from adjusted gross profit, and minus (3) interest expense under Offerpad’s senior and mezzanine secured credit facilities incurred on homes sold during the period. This includes interest expense recorded in prior periods in which the sale occurred.

Offerpad’s senior and mezzanine secured credit facilities are secured by its homes in inventory and drawdowns are made on a per-home basis at the time of purchase and are required to be repaid at the time the homes are sold. Offerpad defines contribution margin after interest as contribution profit after interest as a percentage of revenue.

Offerpad views this metric as an important measure of business performance. Contribution profit after interest helps management assess contribution margin performance, per above, when fully burdened with costs of financing.

The following table presents a reconciliation of Offerpad’s adjusted gross profit, contribution profit and contribution profit after interest to its gross profit, which is the most directly comparable GAAP measure, for the periods indicated:

OFFERPAD, INC.

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
(in thousands, except percentages and homes sold, unaudited)    2021      2020      2021      2020  

Gross profit

   $ 50,864      $ 17,861      $ 84,401      $ 42,759  

Homes sold

     1,259        1,166        2,277        2,683  

Gross profit per home sold

     40.4        15.3        37.1        15.9  

Adjustments:

           

Inventory impairment—current period (1)

     177        311        189        421  

Inventory impairment—prior period (2)

     (95      (1,696      (142      (833

Interest expense capitalized (3)

     767        920        1,373        2,140  
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted gross profit

     51,713        17,396        85,821        44,487  

Adjustments:

           

Direct selling costs (4)

     (8,787      (8,853      (16,823      (19,298

Holding costs on sales—current period (5)(6)

     (533      (865      (1,161      (2,954

Holding costs on sales—prior period (5)(7)

     (188      (1,147      (214      (1,352

Other income (8)

     7        269        248        498  
  

 

 

    

 

 

    

 

 

    

 

 

 

Contribution profit

     42,212        6,800        67,871        21,381  

Homes sold

     1,259        1,166        2,277        2,683  

Contribution profit per home sold

     33.5        5.8        29.8        8.0  

Adjustments:

           

Interest expense capitalized (3)

     (767      (920      (1,373      (2,140

Interest expense on homes sold—current period (9)

     (1,345      (1,506      (2,826      (5,709

Interest expense on homes sold—prior period (10)

     (386      (2,697      (468      (4,067
  

 

 

    

 

 

    

 

 

    

 

 

 

Contribution profit after interest

     39,714        1,677        63,204        9,465  

Homes sold

     1,259        1,166        2,277        2,683  

Contribution profit after interest per home sold

     31.5        1.4        27.8        3.5  


(1)

Inventory impairment – current period is the inventory valuation adjustments recorded during the period presented associated with homes that remain in inventory at period end.

(2)

Inventory impairment – prior period is the inventory valuation adjustments recorded in prior periods associated with homes that sold in the period presented.

(3)

Interest expense capitalized represents all interest related costs, including senior and mezzanine secured credit facilities, incurred on homes sold in the period presented that were capitalized and expensed in cost of revenue at the time of sale.

(4)

Direct selling costs represents selling costs incurred related to homes sold in the period presented. This primarily includes broker commissions and title and escrow closing fees.

(5)

Holding costs primarily include property taxes, insurance, utilities, homeowners association dues, cleaning and maintenance costs.

(6)

Represents holding costs incurred on homes sold in the period presented and expensed to Sales, marketing, and operating on the Consolidated Statements of Operations.

(7)

Represents holding costs incurred in prior periods on homes sold in the period presented and expensed to Sales, marketing, and operating on the Consolidated Statements of Operations.

(8)

Other income primarily consists of net income to Offerpad from our investment in Offerpad Home Loans, except in the presentation of the first six months of 2021, which represents income from a bulk sale of residential properties.

(9)

Represents both senior and mezzanine interest expense incurred on homes sold in the period presented and expensed to Interest expense on the Consolidated Statements of Operations.

(10)

Represents both senior and mezzanine secured credit facilities interest expense incurred in prior periods on homes sold in the period presented and expensed to Interest expense on the Consolidated Statements of Operations.

Adjusted EBITDA

Offerpad also presents adjusted EBITDA and its related margin, which is a non-GAAP financial measure, which its management team uses to assess its underlying financial performance. Offerpad believes this provides insight into period over period performance, adjusted for non-recurring or non-cash items. Offerpad calculates adjusted EBITDA as net income (loss) adjusted for interest expense, amortization of capitalized interest, taxes, depreciation and amortization and stock-based compensation expense. Offerpad defines adjusted EBITDA Margin as adjusted EBITDA as a percentage of revenue.

Adjusted EBITDA is supplemental to Offerpad’s operating performance measures calculated in accordance with GAAP and has important limitations. For example, adjusted EBITDA excludes the impact of certain costs required to be recorded under GAAP and could differ substantially from similarly titled measures presented by other companies in its industry or companies in other industries. Accordingly, this measure should not be considered in isolation or as a substitute for analysis of Offerpad’s results as reported under GAAP.

The following table presents a reconciliation of Offerpad’s adjusted EBITDA to its net income (loss), which is the most directly comparable GAAP measure, for the periods indicated:

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
(in thousands, except percentages, unaudited)    2021      2020      2021      2020  

Net income (loss)

   $ 9,190      $ (7,390    $ 8,957      $ (18,855

Interest expense

     2,257        2,418        4,175        7,092  

Amortization of capitalized interest (1)

     767        920        1,373        2,140  

Income tax expense

     89        0        89        0  

Depreciation and amortization

     146        102        277        204  

Amortization of stock-based compensation

     649        288        1,263        538  
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted EBITDA

     13,098        (3,662      16,134        (8,881

 

(1)

Amortization of capitalized interest represents all interest related costs, including senior and mezzanine interest related costs, incurred on homes sold in the period presented that were capitalized and expensed in cost of revenue at the time of sale.


 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
Margins    2021     2020     2021     2020  

Gross margin

     13.4     6.2     12.7     6.5

Adjusted gross margin

     13.7     6.1     13.0     6.8

Contribution margin

     11.1     2.4     10.2     3.3

Contribution margin after interest

     10.5     0.6     9.5     1.4

Net Income (loss)

     2.4     (2.6 %)      1.4     (2.9 %) 

Adjusted EBITDA

     3.5     (1.3 %)      2.4     (1.4 %)