Opendoor Investor Presentation Deck
Non-GAAP reconciliations definitions
Adjusted Gross Profit (Loss) and Contribution Profit (Loss)
To provide investors with additional information regarding our margins and return on inventory acquired, we have included Adjusted
Gross Profit (Loss) and Contribution Profit (Loss), which are non-GAAP financial measures. We believe that Adjusted Gross Profit
(Loss) and Contribution Profit (Loss) are useful financial measures for investors as they are supplemental measures used by
management in evaluating unit level economics and our operating performance. Each of these measures is intended to present the
economics related to homes sold during a given period. We do so by including revenue generated from homes sold (and adjacent
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.
Contribution Profit (Loss) provides investors a measure to assess Opendoor's ability to generate returns on homes sold during a
reporting period after considering home purchase costs, renovation and repair costs, holding costs and selling costs.
Adjusted Gross Profit (Loss) and Contribution Profit (Loss) are supplemental measures of our 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 our results as
reported under GAAP. We include a reconciliation of these measures to the most directly comparable GAAP financial measure,
which is gross profit (loss).
Adjusted Gross Profit (Loss) / Margin
We calculate Adjusted Gross Profit (Loss) as gross profit (loss) under GAAP adjusted for (1) inventory valuation adjustment in the
current period, and (2) inventory valuation adjustment in prior periods. Inventory valuation adjustment in the current period is
calculated by adding back the inventory valuation adjustments recorded during the period on homes that remain in inventory at
period end. Inventory valuation adjustment in prior periods is calculated by subtracting the inventory valuation adjustments
recorded in prior periods on homes sold in the current period. We define Adjusted Gross Margin as Adjusted Gross Profit (Loss) as
a percentage of revenue.
We view 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 (Loss) helps management assess
home pricing, service fees and renovation performance for a specific resale cohort.
Appendix
Contribution Profit (Loss) / Margin
We calculate Contribution Profit (Loss) as Adjusted Gross Profit (Loss), minus certain costs incurred on homes sold during the
current period including: (1) holding costs incurred in the current period, (2) holding costs incurred in prior periods, and (3) direct
selling costs. The composition of our holding costs is described in the footnotes to the reconciliation table below. Contribution
Margin is Contribution Profit (Loss) as a percentage of revenue.
We view 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 (Loss) helps management assess
inflows and outflows directly associated with a specific resale cohort.
Adjusted Operating Expense
We present Adjusted Operating Expense, which is a non-GAAP financial measure that bridges the difference between Contribution
Profit (Loss) and Adjusted EBITDA. We believe this measure provides investors and analysts meaningful period over period
comparisons by showing the remaining operating expenses after the costs related to unit level performance are moved to
contribution profit and certain charges that are non-recurring, non-cash, or not directly related to our revenue-generating
operations are removed.
Adjusted Operating Expense is a supplemental measure of our operating expenditures and has important limitations. For example,
this measure excludes the impact of certain costs required to be recorded under GAAP. This measure removes holding costs and
direct selling costs incurred on homes sold during the current period, including holding costs recorded in prior periods, and moves
these costs to contribution margin. This measure could differ substantially from similarly titled measures presented by other
companies in our industry or in other industries. Accordingly, this measure should not be considered in isolation or as a substitute
for analysis of our results as reported under GAAP. We include a reconciliation of this measure to the most directly comparable
GAAP financial measure, which is operating expenses.
We calculate Adjusted Operating Expense as GAAP operating expense adjusted to exclude direct selling costs and holding costs
included in determining Contribution Profit (Loss). It excludes non-recurring goodwill impairment and payroll tax on initial RSU
release. The measure also excludes non-cash expenses of stock-based compensation, depreciation and amortization, and
intangibles amortization. It also excludes expenses that are not directly related to our revenue-generating operations such as
restructuring charges and legal contingency accruals.
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