Opendoor Technologies - Q4 2022
February 23, 2023
Transcript
Operator (participant)
Good day, thank you for standing by. Welcome to the Opendoor Fourth Quarter 2022 Earnings Conference Call. At this time, all participants are in listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Elise Wang, Vice President of Investor Relations. Please go ahead.
Elise Wang (VP of Investor Relations)
Thank you. Good afternoon. Details of our results and additional management commentary are available in our earnings release and shareholder letter, which can be found on the investor relation section of opendoor.com. Please note that this call will be simultaneously webcast on the investor relations section of the company's corporate website. Before we start, I would like to remind you that the following discussion contains forward-looking statements within the meaning of the federal securities laws. All statements other than statements of historical fact are statements that could be deemed forward-looking, including, but not limited to, statements regarding Opendoor's financial condition, anticipated financial performance, business strategy and plans, market opportunity and expansion, and management objectives for future operations. These statements are neither promises nor guarantees. Undue reliance should not be placed on them.
Such forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those discussed here. Additional information that could cause actual results to differ from forward-looking statements can be found in the Risk Factors section of Opendoor's most recent annual report on Form 10-K for the year ended December 31st, 2022, as updated by our periodic reports filed after that 10-K. Any forward-looking statements made in this conference call, including responses to your questions, are based on management's reasonable current expectations and assumptions as of today, and Opendoor assumes no obligation to update or revise them, whether as a result of new information, future events, or otherwise, except as required by law. The following discussion contains references to certain non-GAAP financial measures. The company believes these non-GAAP financial measures are useful to investors as supplemental operational measurements to evaluate the company's financial performance.
For a reconciliation of each of these non-GAAP financial measures to the most directly comparable GAAP metric, please see our website at investor.opendoor.com. I will now turn the call over to Carrie Wheeler, Chief Executive Officer of Opendoor.
Carrie Wheeler (CEO and Chair of the Board)
Good afternoon. Also on the call with me today is Christy Schwartz, our Interim Chief Financial Officer, and Dod Fraser, President of Capital Markets in our enterprise business. I'm looking forward to speaking with you today, not only because it's my first earnings call as Chief Executve Officer, but because of our clarity as to the path ahead, which I believe will make Opendoor stronger than before. While navigating a major housing cycle has not been easy, we've never lost sight of our vision. We are building a managed marketplace for residential real estate that will enable consumers to buy, sell, and move at the tap of a button. Challenging times like these have the benefit of increasing urgency, demanding focus, and putting teamwork front and center. That's energizing and part of why I decided to take the Chief Executive Officer role.
It's clear to me what our value proposition is for customers and where we need to focus at this moment. I also believe deeply in what we're building towards. Our value proposition is incredibly strong. About 99% of home sellers still go through the traditional real estate process, a process that remains offline, uncertain, and totally broken. Customers come to us because they crave the certainty and convenience of our cash offer that they cannot get anywhere else. Even in this moment of high spreads, we are able to convert over 10% of those sellers and earn an NPS of nearly 80. We stand alone in what we're able to offer consumers today. Given our current coverage of almost 30% of all real estate transactions in the U.S. today between our buy box and the markets we're in, we have a significant runway for future growth.
As for right now, we are highly focused on stabilizing our core business and ultimately returning to positive free cash flow, and we're making solid progress. As of year-end, we sold or were in contract to sell two-thirds of the loss-making homes acquired before the housing market reset, also known as our Q2 cohort, and we expect they'll be behind us shortly. The homes we've acquired since the reset are outperforming our expectations and are on track to deliver contribution margins in line with our 4%-6% annual margin targets once they're fully sold. However, we've lowered our acquisition volumes via higher spreads in our offers coupled with lower marketing spend. We expect to keep relatively high spreads in the near term given continued uncertainty into how the housing market will perform.
We have reduced our spreads from last year's record levels based on early indicators of stabilization in the housing market, and we'll continue to do so as we see more consistent positive macro signs. We would expect lower spreads to translate into higher acquisition volumes. We're going to manage our cost structure in light of how expected volumes are pacing this year and next, with the goal of returning the business to adjusted income profitability in 2024, assuming some normalization in the housing market. Stabilizing our first-party business, we are aligning on three key areas in 2023 to further our progress towards building the managed marketplace for residential real estate. First is to enable more sellers to choose Opendoor. No matter the macro backdrop, sellers value the certainty and simplicity that an Opendoor offer provides.
This year, we're focused on diversifying our demand funnel so that more home sellers start the journey with Opendoor. The recent launch of our Zillow partnership is one key example set to substantially increase our reach in a scalable and efficient way. We're also expanding our List with Certainty product, which gives sellers the option of listing on the MLS while retaining the certainty of an Opendoor offer that they can take at any time. Second is to realize greater operational efficiencies throughout the business by shifting our focus from building for scale and velocity to strengthening our foundational pricing, operations, and customer platforms. This includes continued improvement in pricing capabilities to increase offer competitiveness and inventory turns. We will also invest in refactoring our tech platform and infrastructure to enhance productivity and reduce fixed expenses.
We are going after at least 100 basis points of margin improvement from all these initiatives by year-end, the full impact of which we expect to realize in 2024. I'll be disappointed if we don't do better than that. Finally, we're building Exclusives, our third-party product offering that will be critical to creating a managed marketplace. This will position Opendoor to have a mix of on and off-balance-sheet transaction volumes to enable capital-efficient market share gain for years to come. We plan to scale this product in three phases. First, we're focused on perfecting the consumer experience. Second, we will build liquidity and network effects in an individual market. Third, we'll refine our playbook and scale to all markets.
Given our highly focused investment approach this year, we expect to be in phases one and two for 2023, meaning we'll go deep in selected markets to build liquidity and selection that's required for a great user experience. While our ambitions remain significant long term, we're realigning our near-term goal to 30% of transactions in our marketplace by the end of the year in those markets where we've launched Exclusives. As we look ahead, we're energized about our future. We've set clear goals that will stabilize the business in the short term while strengthening our foundation for the long term, and we believe we have the team, the balance sheet, and plans in place to ensure we realize these goals.
With every customer we serve, we're more convinced that the current process of buying and selling a home is broken, and that Opendoor is in a position like no other to continue to transform the status quo and be the category winner that we've always envisioned. With that, I'll pass the call over to Christy to discuss our financial highlights.
Christy Schwartz (CFO)
Thanks, Carrie. Our fourth quarter results reflect actions taken since Q2 to navigate changes in the housing market. We delivered $2.9 billion of revenue, down 25% versus prior year due to slower resale clearance rates and our decision to reduce our acquisition pace beginning midyear during a time of significant market uncertainty. We ended the full year with $15.6 billion in revenue, which was 94% higher than 2021. This growth was driven by our strong first half performance. We purchased 3,427 homes in the fourth quarter, down 64% versus the prior year. For the full year, we acquired 34,962 homes, down 5% versus 2021.
Our gross profit was 2.5%, and our contribution margin was -7.2% in the fourth quarter, which reflects our resale mix that is weighted to the Q2 cohort of longer-dated, lower-margin homes, as well as the seasonal softness typically seen in the fourth quarter. Our new book of homes, or homes we offered on starting in July of last year, is performing well above our expectations and off to a stronger start than acquisition cohorts from prior years. This demonstrates the strength of our value proposition, which despite record spreads, still enables us to create attractive cohorts in a negative HPA environment. Notwithstanding the macro challenges we faced beginning in the second quarter of 2022, our full year contribution margin was 3.4% compared to our annual contribution margin target of 4%-6%.
Adjusted EBITDA loss was $351 million, and adjusted operating expenses totaled $144 million in the fourth quarter, both consistent with guidance. We ended 2022 with adjusted EBITDA loss of $168 million versus adjusted EBITDA of $58 million in 2021. Turning to our balance sheet, as of the end of the year, we had total capital of $2 billion, comprised of $1.3 billion in unrestricted cash equivalents, and marketable securities, and $670 million of equity invested in our homes. We had $12 billion in non-recourse asset-backed facilities, which is significantly in excess of current inventory levels. We expect that we will reduce our committed capacity in 2023. This will lower our required restricted cash levels and associated interest costs.
As we enter 2023, we are highly focused on preserving capital and operating with strong cost discipline. Our goal is to return the business to positive adjusted net income upon delivering approximately $10 billion of annualized retail revenue, which we expect to achieve by mid-2024. Assuming some normalization in the housing market, we expect to be able to return to this pace by resuming the market share we had three years ago, adjusted for the more than doubling of our market footprint. We are continuing to operate with a cautious stance in the near term as we believe the Fed's actions will continue to dictate the outlook for housing.
That said, as Carrie Wheeler mentioned, we have started to see some early signs of housing stabilization, which has in turn allowed us to reduce spreads from the record levels we were embedding for most of the back half of last year. In terms of guidance, we expect our Q1 revenue to be between $2.45 billion-$2.65 billion and adjusted EBITDA loss to be between $350 million and $370 million. Adjusted OpEx, which we define as the delta between contribution margin and adjusted EBITDA, is expected to be around $130 million. Consistent with this guidance, we expect our contribution margins will trough in the first quarter before returning to positive levels in the second half of the year as we increase our new book of inventory. 2023 is an important year for Opendoor.
We will lean into our core strengths and operate with agility and efficiency across the business to ensure that we exit the year stronger and more resilient. We will also invest our capital wisely, focusing on the initiatives that best position us for long-term sustainable growth. Our goal remains to be a profitable market leader and generational company. I will now open the call for questions.
Operator (participant)
Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. We ask that you please limit yourself to one question. Please stand by while we compile the Q&A roster. Our first question comes from the line of Nick Jones with JMP Securities. Your line is now open.
Nick Jones (Director and Equity Research Analyst)
Great. Thank you for taking the questions. If I could ask two, on first, just around kind of negative unit margins. When we think about the full year, it sounds like maybe the first half will still be negative and then it'll improve in the back half. Is that the right way to think about it? I have a follow-up.
Carrie Wheeler (CEO and Chair of the Board)
Hey, Nick. I'm gonna turn it over to Christy, the new voice on our call today. Just by way of background, Christy's been with Opendoor for 6 years. She's our Chief Accounting Officer and has very capably stepped up into the Interim Chief Financial Officer role. I'll hand over to you, Christy.
Christy Schwartz (CFO)
Hi, Nick. Happy to take the question. We expect to return to positive unit margins by the second half of 2023. Right now our results are reflecting a mix of old book and new book, and we've added some transparency on the margins of each book into our shareholder letter. We've been very focused on selling our old book as expeditiously as possible while also preserving margins. We expect 85% to be sold through or in contract by the end of Q1. As soon as we cycle through the Q2 offered cohort, we're into new book inventory and we feel really good about those margins. The new book of inventory delivered 9.7% contribution margin in Q4, and we expect it to perform in line with our target of 4%-6% contribution margin once fully sold through.
As such, once we expect to return to positive unit margins by the second half as the mix of inventory we're selling shifts back to the new book.
Nick Jones (Director and Equity Research Analyst)
Great. Thanks. Maybe on just some of the efficiencies, can you maybe unpack on where we should look to see those show up as we progress through 2023?
Carrie Wheeler (CEO and Chair of the Board)
Yeah, Nick, I'll take that. It's Carrie. I mean, it's really across the entirety of our business. It'll show up a little bit in the CM line, but it'll also show up in our variable SG&A and our fixed OpEx structure. It's really a host of initiatives designed to improve margin, reduce costs, increase operator efficiency, what have you. It'll show up across the board.
Nick Jones (Director and Equity Research Analyst)
Great. Thank you both.
Carrie Wheeler (CEO and Chair of the Board)
Thanks, Nick.
Operator (participant)
Thank you. Our next question comes from the line of Jay McCanless with Wedbush. Your line is now open.
Jay McCanless (Equity Reseach Analyst)
Hey, thanks for taking my questions. I guess the first one, could you talk again, I missed what you were saying about, the 100 basis points, I guess, of cost reductions by 2024 from those structural efficiencies and cost savings. Could you break that out, please?
Carrie Wheeler (CEO and Chair of the Board)
Yeah, I'm happy to. It's Carrie again. You know, we, sitting here today in a moment where we have, you know, lower volumes in the system, it is the perfect opportunity for us, frankly, to go after a lot of basis points we have in the system and just be more efficient. We've been building for years for scale and velocity, and now we wanna build for long-term efficiency and really build more durable savings back into the business. Those savings are gonna come, as I just said to Nick, across a whole host of areas. Some of it will show up in the contribution margin line, i.e. in the unit line. Some of it will show up in our variable SG&A, just in the efficiency of our operators, our home ops team, market ops.
It'll show up also in lower fixed OpEx over time as we reduce some of our direct spend. Those are initiatives that we are going after through the course of 2023. The full impact of them, we don't expect to realize though until 2024, That's where the 100 basis points will show up next year.
Jay McCanless (Equity Reseach Analyst)
I guess the second question, you know, you bought 3,400 homes this quarter. Is something more along that number or call it sub 5,000, is that a better run rate, I guess, for where the business is now? Especially if you're gonna be taking down facility capacity, in your credit facilities this year, is running at kind of that slower 3,000-5,000 pace what we should expect over the next four quarters?
Carrie Wheeler (CEO and Chair of the Board)
Yeah, I'll take the first part of that question, just comment a little bit about where we're pacing right now in terms of acquisitions and how that's showing up. Then I'll turn it over to Dod to talk through how we're thinking about capital structure and financing in light of where we are pacing on volume. You know, the first part of your question, it is two components to volumes right now. One is what's going in the market. The second is what's going on with our spreads. On the market side, you know, sellers are on the sidelines. I mean, I think we all know that. Transactions are down 40% year-over-year. If you look across our markets and our buy box, new listings are the lowest they've ever been since 2004.
That just means there are fewer sellers in the market for us to engage with right now. On our end, we're continuing to embed high spreads into our offers. As you know, high spreads for us means lower offers, lower offers lead to lower conversion, that leads to lower contracts. We have decreased our spreads a fair bit since late last year when they were at record levels, and I expect we'll continue to do so just given seasonal tailwinds as we come to the new year and also the fact that the housing market is starting to firm up a little bit. The reality is the housing market remains uncertain, and we're gonna continue to operate with a fair level of caution, and we'll continue to operate with high spreads for the foreseeable future. Back on volumes.
We don't break out where we're pacing specifically on volumes. I can tell you, for us, you know, Super Bowl tends to be a jumping-off point for a lot of home sellers to get back in the market. As we've been decreasing spreads since last year, you know, there's a lag in our business between offer to contract, and we do expect to see a pickup in volume as we move through the second quarter. Seasonality goes on throughout the entire year. We're seeing tailwinds right now. Seasonality shows up in the form of a slower back half, so we may see increased spreads in the back half. That's, that's how you think about volumes for the pace of the year. Dodd, do you wanna talk a little bit about how we're thinking about sizing facility?
Dod Fraser (President)
Yeah, happy to. I think, I mean, just to highlight it, the inventory balances at the end of the year were $4.5 billion, and we have $12 billion in capacity. That is more than adequate for the financing and sort of forward view of where we're headed. I think the other piece that's important to highlight is lenders like to be utilized. Taking down that capacity is something we've done and modulating that capacity for the 7 years that I've been here. I think our it's something we're very comfortable with reducing and feel like we will still have ample capacity to account for any upside to inventory.
Jay McCanless (Equity Reseach Analyst)
Great. Thanks. That's all my questions.
Operator (participant)
Thank you. Our next question comes from the line of Jason Helfstein with Oppenheimer. Your line is now open.
Chad Larkin (Dierctor of Equity Research)
Hey, thanks. This is Chad on for Jason. You talked about 30% of your 2023 transactions going through Exclusives in markets where the marketplace is launched. Two questions on that. First, any sense what percent of your total markets you'll be launched in, you know, kinda by the end of the year? Do you believe that that's driving the return to positive unit economics in the back half? Or is that just, you know, kind of the improvement in the new home cohorts? Thank you.
Carrie Wheeler (CEO and Chair of the Board)
Hey, Chad. Yeah, our focus right now for 3P or for marketplace is really to refine and test in a local market. We're excited about the signal we're seeing so far. I mean, we're seeing sellers as being very excited to opt into the program. We have about 3% share of the listings in the market that we're trialing in right now, off to an encouraging start. We really wanna focus on first perfecting the customer experience, step two is to build density and liquidity so that we can own that market. We'll do that before we wanna kind of spread out further. I don't know the number of markets we'll be at by the end of the year. It's. We haven't given an actual target.
It would be a relatively, I think, small number right now, but we are hoping to pace to a higher number by the end of the year into 2024. It's unrelated to what Christy said as to how contribution margins are gonna play out for the rest of the year. That entirely has to do with the mix between our old book as we sell that off and as our new book becomes the vast majority to all of our margins in the second half.
Operator (participant)
Thank you. Our next question comes from the line of Ygal Arounian with Citi. Your line is now open.
Ygal Arounian (Director of Internet Equity Securities)
Hey, good afternoon, everyone. I wanted to just go back to the macro for a second. You know, you're talking about stabilization and just kind of in the last couple of weeks, we're starting to see rates go back up a little bit and, you know, starting to see that impact, mortgage demand again. Just wanted to get a sense of what you're building into your spreads and what you're thinking on the macro, you know, as we move forward, and you're bringing your spreads down a little bit. Just wanna understand what your expectations are for the housing market as we work our way through the rest of the year.
Dod Fraser (President)
Yeah, happy to answer it. Look, if you look at where the market is right now, we're continuing to see very low supply on the market, really multi-decade lows continuing. New listings are the lowest since 2004. That's a good setup for more stable pricing in 2023. I think it's also important to keep in mind how sort of the risk that we're taking from a housing price perspective. We typically own homes for, call it, 4 months, so that's the duration of exposure we're taking. If you look at home price appreciation, we have a fun chart in the back of our shareholder letter that shows month-over-month home price appreciation.
If you look at the first half of the year, you almost always going back even into the eighties, you see very strong home price appreciation, and then that moderates in the back half of the year. This is the point of the year where, given the strong leading indicators we've seen in January, we've been able to reduce those spreads. We continue, though, to be very cautious of the back half of the year, to your point, around interest rate volatility and how that could flow through to the impact on consumer demand. Our base case is that spread will actually need to increase in the back half of the year, especially if the Fed has to raise rates higher to combat inflation higher than people are expecting.
Ygal Arounian (Director of Internet Equity Securities)
Got it. In terms of, you know, market expansion, buy box, and all those things, have you know, understanding we're, you know, on risk off mode and not purchasing the level of homes we were purchasing last year, pulled back in any of the markets? Is your overall strategy
Change, I'm guessing it hasn't really changed, but does the pace of it change? Have you pulled back anywhere? Have you pulled back on your buy box at all? Or is that maybe just on hold in the near term until we get back to a more normalized market? Thanks.
Dod Fraser (President)
I think the way that we've tackled this today and in the past is through spread dispersion. We will account for changes or higher risk by market or even by price point by charging a different spread. You can see that play out both in terms of specific markets as well as within pockets of the market, sort of zip codes or otherwise. That's really the lever by which we adjust pricing to account for that risk.
Ygal Arounian (Director of Internet Equity Securities)
Thank you.
Dod Fraser (President)
It's not pulling back on buy box to be specific. More pulling, adjusting the spreads that are charging customers based on the riskiness of the .
Christy Schwartz (CFO)
Got it. Thanks.
Operator (participant)
Thank you. Our next question comes from the line of Justin Patterson with KeyBanc Capital Markets. Your line is now open.
Justin Patterson (Managing Director and Equity Research Analyst)
Great. Thank you very much, and good afternoon. Carrie, I wanted to go back to Exclusive to start with. Can you talk about the steps to build density within those markets and just really get the supply you need to succeed with that and perhaps just frame results for the core business? Just a secondary question on the Zillow relationship. I know it's very, very early here, but could you just talk about how we think about the pace of that relationship expanding, moving into new markets? How you think about the conversion quality from that funnel versus some of the other channels you lean on? Thank you.
Carrie Wheeler (CEO and Chair of the Board)
Yeah. Hey, Justin, do you mind repeating the first part of your first question? You broke up there a little bit for me. I had a hard time hearing it.
Justin Patterson (Managing Director and Equity Research Analyst)
Sorry about that. The first question was just around phase two of the Exclusives product. Can you talk about just the steps needed to build density and market for that?
Carrie Wheeler (CEO and Chair of the Board)
It's really about aggregating supply and then from there, you know, aggregating buyer demand, which, you know, we have a head start on through our 1P business, but it's really about buying, bringing more buyers into the system, over time. On the Zillow side, as you said, it's early. I mean, we had a Valentine's Day launch. Far so good. We're optimistic and enthusiastic about the prospects for that partnership, where, you know, we'll expect to launch it in more markets over the course of the year. For us, we think it's going to be a very interesting and creative marketing channel for us, and just allow us to put our brand and our offer in front of a lot more home sellers.
Justin Patterson (Managing Director and Equity Research Analyst)
Thank you.
Operator (participant)
Thank you. Our next question comes from the line of Curtis Nagle with Bank of America. Your line is now open.
Curtis Nagle (Director and Senior Equity Research Analyst)
Great. Thanks for taking the question. Carrie, just wanted to focus for a sec on spreads. You know, the new cohort, you know, you took up spreads, led to some nice contribution margins so far, albeit on lower volumes. I'm not sure if I heard this incorrectly, but it sounds like you might be pulling back spreads a little bit as we go further into the year. If that's the case, how does that impact, you know, potential contribution margins, if that were the case?
Carrie Wheeler (CEO and Chair of the Board)
I think the comment we made is, one, we've been reducing spreads since late last year when they were at record levels. You know, peak uncertainty, record level spreads. We've been reducing them as we've come into the new year. Two reasons, seasonal tailwinds. Two, we have seen signs that the housing market is, you know, stabilizing. The comments that John made earlier about where we are in terms of HPA prospects, the underpinning of, like, an absence of supply, new listings, what have you. We'd expect to continue to do so for a while.
Curtis Nagle (Director and Senior Equity Research Analyst)
Mm-hmm.
Carrie Wheeler (CEO and Chair of the Board)
That being said, seasonal tailwinds turn into seasonal headwinds in the second half of the year every year. There is some chance that we will look to, like, raise spreads again in the back half of the year. We'll see. I mean, this is, you know, I think the beauty of our business is that it's dynamic, and we're able to raise spreads in response to what we're seeing in the market. We'll continue to do so as we get more signal.
Curtis Nagle (Director and Senior Equity Research Analyst)
Okay. Got it. Just a follow-up, the Q1 guidance. You know, for the, you know, $370 million to $390 million negative EBITDA, how should we think about the GAAP gross margins that would be incorporated into that?
Christy Schwartz (CFO)
Hey, Curtis, I'll take that. We don't generally provide guidance on GAAP gross margins. You can kind of back into contribution margin using adjusted EBITDA and adjusted OpEx. You can, you know, you can look at the table for the new book and old book of inventory in our shareholder letter to get an idea of the margins, the GAAP gross margins that we're seeing on those two books. There's also a breakout of inventory by new book and old book in the shareholder letter that would be helpful.
Curtis Nagle (Director and Senior Equity Research Analyst)
Okay. Got it. Thank you.
Operator (participant)
Thank you. As a reminder, to ask a question at this time, please press star one one on your touchtone telephone. Our next question comes from the line of Ryan Tomasello with KBW. Your line is now open.
Ryan Tomasello (Managing Director)
Hi, everyone. Thanks for taking the questions. Can you maybe provide a bit more detail for how you plan to get to adjusted net income profitability at $10 billion of revenue? What assumptions you're baking in there for contribution margins, mix of 1P, 3P, OpEx, et cetera. I guess just running some back of the envelope math, assuming 5% contribution margins imply that you're assuming significant efficiencies on either the financing or OpEx side or maybe baking in higher unit economics altogether. Just trying to understand the moving pieces there. Thanks.
Carrie Wheeler (CEO and Chair of the Board)
Yeah, I'm happy to take that one, Ryan. I mean, number one, it bears mentioning, we're highly focused on returning our business to adjusted net income profitability as quickly as possible. For us, the tipping point is $10 billion of annualized revenue to get there. We believe we should get back there by, say, the middle of 2024, assuming, number one assumption, a more normalized home environment.
If you go back at 2019 and look at where we were, which is a more, you know, good analog for a normal housing market, and you think about the share we had back then, and you adjust it for just where we are today, which is 4x bigger in terms of the combination of additional buy box expansion and new markets, you know, with like-for-like share, frankly, even a little less than like-for-like share, gets you back to $10 billion in 2024. That's on the top line. I don't think you have to squint too hard to get to that number. By the way, add on, you know, much greater brand awareness than we had in 2019, much deeper partnership channels, what have you.
On the margin side, I mean, we still think about the 1P business contributing 4%-6%. As I said in my earlier comments, we're going after at least 100 basis points of margin throughout the entire system, and we'd expect to be back to normalized turns, call that, you know, 3-3.5 turns a year. I think you put all that together, and you get to ANI positive. It does not have large assumptions for a mix of capital-light or asset-light business, i.e., 3P or List with Certainty, for example. Again, you know, your bias, our bias is to be conservative in how we kind of put out these markers. We haven't embedded a lot of new product lines into that number. We feel good about the $10 billion marker.
Ryan Tomasello (Managing Director)
Okay, great. And then a quick follow-up would be, just trying to understand how you're thinking about the capital requirements for the business once you move past the Q2 cohort here and the business mix transitions to a balance of both the 1P and 3P transactions. Is there a minimum level of cash you are targeting that provides you with a large enough balance sheet to support what will still be a capital-intensive 1P business while also providing you with enough flexibility to invest in scaling the 3P business, which I assume you would look to consider some marketing spend there to drive adoption? Thanks.
Dod Fraser (President)
Yes. Happy to answer that. Look, I think we're very comfortable executing our business plan with the $2 billion in capital that we have today, $1.3 billion in unrestricted cash. We don't guide beyond the first quarter, but to your point, we do have minimum cash requirements in our financing facilities, but those are substantially below where our current cash balance is. I think the plan that we've articulated, the plan that we're going after, we are very comfortable with $2 billion in capital is more than enough to finance the plans we're marching against.
Operator (participant)
Thank you. Our next question comes from the line of Ryan McKeveny with Zelman & Associates. Your line is now open.
Ryan McKeveny (Managing Director)
Thank you very much. Just to come back to Exclusives, I have a three-part question, so I'll throw it out all at once. You mentioned in the letter that you began to offer Exclusives as an option to sellers in 4Q. Firstly, just any thoughts you can share on the initial reception from home sellers. Second part of the question, more generally, can you just talk about the value proposition of to home sellers of Exclusives? You know, I think we all understand the value prop around the 1P model with convenience and certainty of the cash offer, et cetera. Maybe you can talk about how you frame that value prop of ultimately why would a seller, you know, go the 3P option compared to listing traditionally.
The last piece, and I can come back to these. Sorry, it's a long question. Lastly, I think last quarter you mentioned a 5% service fee for third-party transactions. Is that still the expectation? Is that 5% service fee, is that specific to what a home seller would pay to list, or is that possibly some combination of, kind of a fee charged to the seller, but also a fee charged to the home buyer?
Carrie Wheeler (CEO and Chair of the Board)
I'll do my best to remember all of that. Let me start at the top. We started with exclusive listings. That was taking our Opendoor-owned inventory and windowing it, in effect, to buyers that they could come and buy the home on an as-is-where-is fixed fee basis. We have had really good success with that. We've had sell through anywhere from 15%-20% in the first two weeks on those exclusive listing homes. That was using our inventory, and we continue to pursue that model. Step two, I think it's the second part of your question was around what the value prop is to sellers.
The value prop to them is if they opt into putting in their home in the marketplace, they're still looking at a scenario where they are not enduring more than one showing, and they have a limited window of time by which we are going to surface multiple offers for them, one from the institutional network that we have in our relationships, which we've had for years now. We can help monetize those and bring those offers to the fore that they can't otherwise get. We can bring other offers from other buyers in our network to them. They have the option to choose to take that price or not. They obviously also have the backup of our certain all-cash offer if that's something they want to avail themselves. It's a lot less burdensome, plus time.
There's still certainty in the process. Again, vastly superior to the traditional selling process today. That's the value prop to them. As for the economics, I suspect we'll continue to tinker with them and experiment over time. Today, we charge a 5% fee to the seller, and we're sharing some of that with the buyer. How that shakes out over time, I don't know, so I think I'm a little low to commit to the spec-specific of the unit economics quite now. That, for example, doesn't include any services of cash. There's no title and escrow in there. All those things to come, but that is where we're at today.
Ryan McKeveny (Managing Director)
That's great. Thank you very much, Carrie. One additional question. The comment about List with Certainty. I don't believe I've heard you talk about that before, so maybe you can just expand on what that product is, you know, and how that kinda fits into the broader equation.
Carrie Wheeler (CEO and Chair of the Board)
I mean, in this high spread environment, the good news is that we can still convert 10% of sellers because they're indexing on certainty and convenience. There's 90% that we're not addressing in the current high spread environment. We wanna make sure that we still give them the option to move. We are, with expanding our List with Certainty products, they can list their home on the market with us, to maximize market price, still retain the certainty of our all-cash offer that they can take at any time. So far, we're seeing about 20%-25% of customers choose List with Certainty when presented with that option. We're optimistic that we'll be driving more asset-light volumes through that product over time in this environment.
Ryan McKeveny (Managing Director)
Got it. Thank you very much.
Carrie Wheeler (CEO and Chair of the Board)
You're welcome.
Operator (participant)
Thank you. Our last question comes from the line of Jay McCanless with Wedbush. Your line's now open.
Jay McCanless (Equity Reseach Analyst)
Hey. Thanks for taking my follow-up. Just, Carrie, I wanted to push a little bit more on if the mortgage market doesn't go down, if the mortgage rates don't go down, if mortgage rates actually go up from here, and we see sellers be even more reluctant to get out of the house they're in now, I guess, what's plan B and what does the business look like in that scenario? Do you walk away from higher priced markets, so you're not having to carry as much on the credit facilities? Do you go heavier, I don't know, into whether it's, you know, payments to get listings, things like that? Just maybe walk us through an environment where rates go up instead of down.
Carrie Wheeler (CEO and Chair of the Board)
Yeah. I mean, I'd say at the highest level, you know, I think we've shown, hopefully, in what we've provided in the shareholder letter, we can still create attractive unit economics, attractive cohorts, even in this environment of high rates, high mortgage rates, rate volatility, and we expect to continue to do so. You know, mortgage rates have been pretty volatile the last couple of weeks. We're reflecting that in how we adjust for spreads. We'll continue to do that through the course of the year. If volumes are continue to be compressed for the industry and they continue to be down, and that persists for a long period of time, you know, I think we know that it's imperative that we manage our cost structure and our capital. Good news is we have a lot of it.
It's very dear, it's imperative that we mitigate losses and preserve book value. We're gonna manage the business with that in mind. We're not managing it to the absolute low point of the trough today. If I look ahead to 2024, if that's sort of implicit in your comments and we're in for a longer trough period in the housing cycle, we'll take a harder look at our cost structure in light of that. We'll have to.
Jay McCanless (Equity Reseach Analyst)
Okay, great. Thanks for taking my follow-up.
Operator (participant)
Thank you. I would now like to hand the conference back over to Carrie Wheeler for closing remarks.
Carrie Wheeler (CEO and Chair of the Board)
I just wanna thank everyone for joining and participating today. As hopefully you heard from us, we feel confident the decisions we've made to date to navigate what has been a challenging housing environment are enabling us to achieve both our customer goals and our long-term financial objectives. Thank you, and we look forward to talking to you again soon.
Operator (participant)
This concludes today's conference call. Thank you for participating. You may now disconnect.