Press Release

Redfin Second-Quarter 2018 Revenue up 36% Year-over-Year to $142.6 Million

August 09, 2018

SEATTLE, Aug. 09, 2018 (GLOBE NEWSWIRE) -- Redfin Corporation (NASDAQ: RDFN), the technology-powered residential real estate brokerage, today announced financial results for the second quarter ended June 30, 2018. All financial measures, unless otherwise noted, are presented on a GAAP basis and include stock-based compensation as well as depreciation and amortization expenses.

Revenue increased 36% year-over-year to $142.6 million during the second quarter. Gross profit was $45.2 million, an increase of 22% from $37.0 million in the second quarter of 2017. Gross margin was 32%, compared to 35% in the second quarter of 2017. Real estate services(1) gross profit was $45.5 million, an increase of 22% from $37.2 million in the second quarter of 2017. Real estate services gross margin was 35%, compared to 37% in the second quarter of 2017. Operating expenses were $42.8 million, an increase of 31% from $32.7 million in the second quarter of 2017. Operating expenses were 30% of revenue, down from 31% in the second quarter of 2017.

Net income was $3.2 million, compared to net income of $4.3 million in the second quarter of 2017. Stock-based compensation was $4.8 million, up from $2.6 million in the second quarter of 2017. Depreciation and amortization was $1.9 million, up from $1.6 million in the second quarter of 2017.

GAAP net income (loss) per share, basic and diluted, reflects accretion expense for changes in the fair value of our redeemable convertible preferred stock, which was outstanding prior to its conversion to common stock following our initial public offering ("IPO"). GAAP net income per share, basic and diluted, was $0.04, compared to GAAP net loss per share, basic and diluted, of $7.15 in the second quarter of 2017. Adjusted net income per share, basic and diluted,(2) which excludes accretion expense for changes in the fair value of our redeemable convertible preferred stock and assumes its conversion to common stock in connection with our IPO as of the first day of the reported period, was $0.06 in the second quarter of 2017. As a result of the conversion of our redeemable convertible preferred stock in connection with our IPO, there was no accretion expense in the second quarter of 2018.

"Redfin's share gains again accelerated in the second quarter, with especially strong growth in the number of Redfin listings we sold," said Redfin CEO Glenn Kelman. "We also saw the first improvement in homebuyers' engagement with our agents in nearly three years, a sign that our increased levels of personal service will pay off. We expect U.S. home sales growth to slow and even perhaps reverse in August and September, but believe Redfin will continue to gain share at a high rate because of our service quality and pricing, as well as consumers' increasing Redfin awareness. And finally, we've again expanded the portfolio of services we offer our customers, by committing to a long-term expansion of Redfin Now, our business of buying homes from their owners, and selling those homes on our own account."

Highlights

  • Reached market share of .83% of U.S. existing home sales by value in the second quarter of 2018. Redfin’s second-quarter market share increased .19 percentage points year over year, an acceleration from the .15 percentage-point year-over-year increase in the first quarter. This gain shows continued acceleration of market-share gains from 2017, which saw year-over-year increases of .10 percentage points in the first quarter, .11 in the second, .14 in the third, and .15 in the fourth quarter.(3)
  • Increased the percentage of Redfin transactions from repeat customers and personally referred customers by 35% in the second quarter compared to the second quarter of 2017. These customers closed at more than double the rate of those we met directly from the website.
  • Outperformed competitors in retaining buy-side customers as sellers. Customers who bought a home with Redfin were 69% more likely to sell that home with Redfin, compared to traditional-brokerage buyers selling with the same brokerage. In 2016, Redfin buyers were just 42% more likely to sell that home with Redfin compared to the industry average, showing a widening advantage in customer loyalty.
  • Earned a Net Promoter Score ("NPS"), a measure of customer satisfaction, that was 50% higher than competing brokerages’, as measured in a Redfin-commissioned May 2018 survey of people who bought or sold a home in the previous 12 months. In the May 2017 survey, Redfin’s NPS was just 32% better than other brokerages, so the gap is widening. This was the sixth consecutive survey in which Redfin’s customer satisfaction was higher than our competitors’.
  • Introduced a new Home Values tab on all Redfin city and neighborhood pages. Redfin.com users can click on the Home Values tab to see price trends, recently sold homes, information about offers in the area, school rankings, and Walk Score. Home Values pages provide information to consumers while building future website traffic through high-ranking real estate search terms.
  • Expanded Redfin Mortgage to Georgia and Ohio, now serving homebuyers in seven states and Washington D.C., with plans to launch in additional states in the coming months. Redfin Mortgage is part of the long-term vision of integrating lending with Redfin's existing brokerage and title businesses, ultimately leading to an entirely digital closing.

(1) Prior to reporting our financial results for the second quarter ended June 30, 2018, we had one reportable segment ("real estate") that reflected revenue derived from commissions and fees charged on real estate services transactions closed by us or partner agents representing customers in buying and selling homes. Beginning with our financial results for the second quarter ended June 30, 2018, we recognized a new reportable segment ("properties") that reflects revenue from when we sell homes that we previously bought directly from homeowners. Concurrent with our recognition of the new "properties" segment, we changed the name of our "real estate" segment to "real estate services." Prior to our financial results for the second quarter ended June 30, 2018, we included the results from our "properties" segment as part of our "other" segment.

(2) Adjusted net income per share, basic and diluted, are non-GAAP financial measures as defined by the Securities and Exchange Commission ("SEC"). A reconciliation of GAAP to non-GAAP financial measures is provided below in the tables included in this press release. An explanation of these measures is also included below under the heading "Non-GAAP Financial Measures."

(3) We calculate the aggregate value of U.S. home sales by multiplying the total number of U.S. home sales by the mean sale price of these sales, each as reported by the National Association of REALTORS®. We calculate our market share by aggregating the home value of real estate services transactions conducted by our lead agents or our partner agents. Then, in order to account for both the sell- and buy-side components of each transaction, we divide that value by two-times the estimated aggregate value of U.S. home sales.

Business Outlook

The following forward-looking statements reflect Redfin's expectations as of August 9, 2018, and are subject to substantial uncertainty.

For the third quarter of 2018 we expect:

  • Total revenue between $137.1 million and $141.3 million, representing year-over-year growth between 25% and 29% compared to the third quarter of 2017. Properties segment revenue between $10.1 million and $12.0 million is included in the guidance provided.
  • Net income between $1.2 million and $2.8 million, compared to net income of $10.6 million in the third quarter of 2017. This guidance includes approximately $5.6 million of expected stock-based compensation, $2.0 million of expected depreciation and amortization, and $1.6 million of interest expense from the convertible notes issued in July 2018.

Conference Call

Redfin will webcast a conference call to discuss the results at 1:30 p.m. Pacific Time today. The webcast will be open to the public at http://investors.redfin.com. The webcast will remain available on the investor relations website for at least three months following the conference call.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of federal securities laws, including statements regarding our future operating results included under the header Business Outlook. We believe our expectations related to these forward-looking statements are reasonable, but actual results may turn out to be materially different. For factors that could cause actual results to differ materially from the forward-looking statements in this press release, please see the risks and uncertainties identified under the heading "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017, as supplemented by our Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2018, both of which are available on our Investor Relations website at http://investors.redfin.com and on the SEC website at www.sec.gov.  All forward-looking statements reflect our beliefs and assumptions only as of the date of this press release. We undertake no obligation to update forward-looking statements to reflect future events or circumstances.

Non-GAAP Financial Measures

To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we have used non-GAAP financial measures, specifically adjusted net income (loss) per share, basic and diluted, in this press release. The presentation of these financial measures is not intended to be considered in isolation or as a substitute of, or superior to, financial information prepared and presented in accordance with GAAP.

We believe these non-GAAP financial measures enable comparison of financial results between periods where net income (loss) per share, basic and diluted, may vary independent of business performance. There are limitations associated with the use of non-GAAP financial measures as an analytical tool, in particular the adjustments to our GAAP financial measures reflect the exclusion of accretion expense, which is related to our redeemable convertible preferred stock that converted into common stock upon the completion of our IPO in August 2017. Included in weighted-average shares outstanding, basic and diluted, are shares of redeemable convertible preferred stock as if all such shares were converted to common stock on the first date of each period presented. These measures may be different from non-GAAP financial measures used by other companies, limiting its usefulness for comparison purposes. A reconciliation of adjusted net income (loss) per share, basic and diluted, to net income (loss) per share, basic and diluted, has been provided in the financial statement tables included in this press release, and investors are encouraged to review the reconciliation.

About Redfin

Redfin (www.redfin.com) is the technology-powered residential real estate brokerage. Founded by software engineers, we run the country's #1 most-visited brokerage website and offer a host of online tools to consumers, including the Redfin Estimate. We represent people buying and selling homes in over 80 markets throughout the United States. Our mission is to redefine real estate in the consumer’s favor. In a commission-driven industry, we put the customer first. We do this by pairing our own agents with our own technology to create a service that is faster, better, and costs less. Since our launch in 2006 through 2017, we have helped customers buy or sell more than 120,000 homes worth more than $60 billion.

Redfin-F

Contacts

Investor Relations

Elena Perron, 206-576-8610

ir@redfin.com

Public Relations

Jani Strand or Rachel Musiker, 206-588-6863

press@redfin.com

Redfin Corporation and Subsidiaries
Condensed Consolidated Statements of Operations
(unaudited, in thousands, except share and per share amounts)

       
  Three Months Ended June 30,   Six Months Ended June 30,
  2018   2017   2018   2017
               
Revenue $ 142,642     $ 104,935     $ 222,536     $ 164,802  
Cost of revenue (1) 97,429     67,975     171,626     121,467  
Gross profit 45,213     36,960     50,910     43,335  
Operating expenses:              
Technology and development (1) 13,033     10,090     25,796     19,762  
Marketing (1) 14,435     10,132     27,770     20,591  
General and administrative (1) 15,288     12,466     32,062     26,833  
     Total operating expenses 42,756     32,688     85,628     67,186  
Income (loss) from operations 2,457     4,272     (34,718 )   (23,851 )
Interest income and other income, net:              
Interest income 729     32     1,307     76  
Other income, net 21         179     13  
    Total interest income and other income, net 750     32     1,486     89  
Net income (loss) $ 3,207     $ 4,304     $ (33,232 )   $ (23,762 )
Accretion of redeemable convertible preferred stock $     $ (110,921 )   $     $ (135,690 )
Net income (loss) attributable to common stock - basic and diluted $ 3,207     $ (106,617 )   $ (33,232 )   $ (159,452 )
Net income (loss) per share attributable to common stock - basic $ 0.04     $ (7.15 )   $ (0.40 )   $ (10.74 )
Net income (loss) per share attributable to common stock - diluted $ 0.04     $ (7.15 )   $ (0.40 )   $ (10.74 )
Weighted average shares - basic 83,164,670     14,913,234     82,590,979     14,840,759  
Weighted average shares - diluted 90,743,178     14,913,234     82,590,979     14,840,759  
                       

(1) Includes stock-based compensation as follows:

       
  Three Months Ended June 30,   Six Months Ended June 30,
  2018   2017   2018   2017
               
Cost of revenue 1,392     699     2,691     1,414  
Technology and development 1,726     751     3,200     1,482  
Marketing 157     123     276     242  
General and administrative 1,503     1,065     2,808     2,182  
Total 4,778     2,638     8,975     5,320  
 


Redfin Corporation and Subsidiaries

Condensed Consolidated Balance Sheets
(in thousands, except share and per share amounts)

  June 30, 2018   December 31, 2017
  (unaudited)    
       
Assets:      
Current assets:      
Cash and cash equivalents $ 194,237     $ 208,342  
Restricted cash 17,408     4,316  
Prepaid expenses 3,337     8,613  
Accrued revenue, net 18,902     13,334  
Inventory 14,519     3,382  
Other current assets 1,828     328  
Loans held for sale 3,584     1,891  
  Total current assets 253,815     240,206  
Property and equipment, net 23,855     22,318  
Intangible assets, net 3,050     3,294  
Goodwill 9,186     9,186  
Other assets 7,077     6,951  
  Total assets: 296,983     281,955  
Liabilities and stockholders' equity:      
Current liabilities:      
Accounts payable 3,855     1,901  
Accrued liabilities 34,045     26,605  
Other payables 17,700     4,068  
Loan facility 3,492     2,016  
Current portion of deferred rent 1,467     1,267  
  Total current liabilities 60,559     35,857  
Deferred rent, net of current portion 10,811     10,668  
  Total liabilities 71,370     46,525  
Commitments and contingencies      
Stockholders’ equity:      
Common stock—par value $0.001 per share; 500,000,000 shares authorized; 83,785,251 and
81,468,891 shares issued and outstanding, respectively
84     81  
Preferred stock—par value $0.001 per share; 10,000,000 shares authorized and no
shares issued and outstanding
     
Additional paid-in capital 387,764     364,352  
Accumulated deficit (162,235 )   (129,003 )
Total stockholders’ equity 225,613     235,430  
Total liabilities and stockholders’ equity: $ 296,983     $ 281,955  
 


Redfin Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows
(unaudited, in thousands)

   
  Six Months Ended June 30,
  2018   2017
       
Operating activities      
Net loss $ (33,232 )   $ (23,762 )
Adjustments to reconcile net loss to net cash used in operating activities:      
Depreciation and amortization 3,902     3,539  
Stock-based compensation 8,974     5,320  
Change in assets and liabilities:      
     Prepaid expenses 5,277     1,842  
     Accrued revenue (5,568 )   (3,885 )
     Inventories (11,137 )   (1,582 )
     Other current assets (1,470 )   8,064  
     Other long-term assets (125 )   377  
     Accounts payable 1,934     901  
     Accrued liabilities 7,481     8,481  
     Deferred lease liability (583 )   1,097  
     Origination of loans held for sale (29,249 )   (3,022 )
     Proceeds from sale of loans originated as held for sale 27,555     2,477  
         Net cash used in operating activities (26,241 )   (153 )
Investing activities      
Maturities and sales of short-term investments     1,239  
Purchases of short-term investments     (992 )
Purchases of property and equipment (4,045 )   (9,435 )
         Net cash used in investing activities (4,045 )   (9,188 )
Financing activities      
Proceeds from issuance of common stock 14,394     1,017  
Tax payment related to net share settlements on restricted stock units (227 )    
Payment of initial public offering costs     (1,807 )
Borrowings from warehouse credit facilities 28,551     2,932  
Repayments of warehouse credit facilities (27,076 )   (2,403 )
Other payables - customer escrow deposits related to title services 13,631     7,814  
         Net cash provided by financing activities 29,273     7,553  
Net change in cash, cash equivalents, and restricted cash (1,013 )   (1,788 )
Cash, cash equivalents, and restricted cash:      
Beginning of period 212,658     67,845  
End of period $ 211,645     $ 66,057  
Supplemental disclosure of non-cash investing and financing activities      
Accretion of redeemable convertible preferred stock $     $ (135,690 )
Stock-based compensation capitalized in property and equipment $ (244 )   $ (131 )
Initial public offering cost accruals $     $ (343 )
Property and equipment additions in accounts payable and accrued expenses $ (21 )   $  
Leasehold improvements paid directly by lessor $ (926 )   $ (104 )
Cash in transit for exercised stock options $ (30 )   $  
           


Redfin Corporation and Subsidiaries

Supplemental Financial Information and Business Metrics
(unaudited)

   
  Three Months Ended
  Jun. 30,
2018
  Mar. 31,
2018
  Dec. 31,
2017
  Sep. 30,
2017
  Jun. 30,
2017
  Mar. 31,
2017
  Dec. 31,
2016
  Sep. 30,
2016
  Jun. 30,
2016
                                   
Monthly average visitors (in thousands) 28,777     25,820     21,377     24,518     24,400     20,162     16,058     17,795     17,021  
Real estate services transactions:                                  
Brokerage 12,971     7,285     8,598     10,527     10,221     5,692     6,432     7,934     7,497  
Partner 3,289     2,237     2,739     3,101     2,874     2,041     2,281     2,663     2,602  
Total 16,260     9,522     11,337     13,628     13,095     7,733     8,713     10,597     10,099  
                                   
Real estate services revenue per transaction:                                  
Brokerage $ 9,510     $ 9,628     $ 9,659     $ 9,289     $ 9,301     $ 9,570     $ 9,428     $ 9,333     $ 9,524  
Partner 2,281     2,137     2,056     1,960     1,945     1,911     1,991     1,932     1,633  
Aggregate $ 8,048     $ 7,869     $ 7,822     $ 7,621     $ 7,687     $ 7,548     $ 7,481     $ 7,474     $ 7,491  
                                   
Aggregate home value of real estate services transactions (in millions) $ 7,910     $ 4,424     $ 5,350     $ 6,341     $ 6,119     $ 3,470     $ 4,018     $ 4,898     $ 4,684  
U.S. market share by value 0.83 %   0.73 %   0.71 %   0.71 %   0.64 %   0.58 %   0.56 %   0.57 %   0.53 %
Revenue from top-10 Redfin markets as a percentage of real estate services revenue 68 %   66 %   69 %   69 %   69 %   68 %   71 %   72 %   74 %
Average number of lead agents 1,415     1,327     1,118     1,028     1,010     935     796     756     756  
                                                     


Redfin Corporation and Subsidiaries

Supplemental Financial Information
(unaudited, in thousands)

       
  Three Months Ended June 30,   Six Months Ended June 30,
  2018   2017   2018   2017
               
Revenue by segment:              
Brokerage revenue $ 123,355     $ 95,069     $ 193,498     $ 149,540  
Partner revenue 7,503     5,589     12,285     9,490  
Total real estate services revenue 130,858     100,658     205,783     159,030  
Properties revenue $ 8,986     $ 1,981     $ 12,038     $ 1,981  
Other revenue $ 2,798     $ 2,296     $ 4,715     $ 3,791  
Total revenue $ 142,642     $ 104,935     $ 222,536     $ 164,802  
               
Cost of revenue by segment:              
Real estate services cost of revenue 85,337     63,436     153,501     114,592  
Properties cost of revenue 9,088     2,030     12,430     2,036  
Other cost of revenue 3,004     2,509     5,695     4,839  
Total cost of revenue $ 97,429     $ 67,975     $ 171,626     $ 121,467  
               
Gross profit by segment:              
Real estate services gross profit $ 45,521     $ 37,222     52,282     44,438  
Properties gross profit (102 )   (49 )   (392 )   (55 )
Other gross profit (206 )   (213 )   (980 )   (1,048 )
Total gross profit $ 45,213     $ 36,960     $ 50,910     $ 43,335  
 


Redfin Corporation and Subsidiaries

Reconciliation of GAAP to non-GAAP Financial Measures
(unaudited, in thousands, except share and per share amounts)

       
  Three Months Ended
June 30,
  Six Months Ended
June 30,
  2018*   2017   2018*   2017
               
Net income (loss) attributable to common stock, as reported $ 3,207     $ (106,617 )   $ (33,232 )   $ (159,452 )
Adjustments:              
Add-back: Accretion of redeemable convertible preferred stock     110,921         135,690  
Net income (loss) attributable to common stock, adjusted $ 3,207     $ 4,304     $ (33,232 )   $ (23,762 )
Non-GAAP adjusted net income (loss) per share - basic $ 0.04     $ 0.06     $ (0.40 )   $ (0.34 )
Non-GAAP adjusted net income (loss) per share - diluted $ 0.04     $ 0.06     $ (0.40 )   $ (0.34 )
Weighted-average shares used to compute non-GAAP adjusted net income (loss)
per share — basic
83,164,670     70,335,236     82,590,979     70,262,761  
Weighted-average shares used to compute non-GAAP adjusted net income (loss)
per share — diluted
90,743,178     74,177,876     82,590,979     70,262,761  
               
Reconciliation of weighted-average shares used to compute net income (loss) per
share attributable to common stockholders, from GAAP to non-GAAP —basic and
diluted
             
               
Weighted-average shares used to compute GAAP net income (loss) per share
attributable to common stockholders — basic
83,164,670     14,913,234     82,590,979     14,840,759  
               
Conversion of redeemable convertible preferred stock as of beginning of period
presented
    55,422,002         55,422,002  
Weighted-average shares used to compute non-GAAP adjusted net income
(loss) per share — basic
83,164,670     70,335,236     82,590,979     70,262,761  
               
Weighted-average shares used to compute GAAP net income (loss) per share
attributable to common stockholders — diluted
90,743,178     14,913,234     82,590,979     14,840,759  
               
Conversion of redeemable convertible preferred stock as of beginning of period
presented
    55,422,002         55,422,002  
Incremental options to purchase common stock     3,842,640          
Weighted-average shares used to compute non-GAAP adjusted net income
(loss) per share — diluted
90,743,178     74,177,876     82,590,979     70,262,761  
 

*  All amounts for 2018 are presented on a GAAP basis and included for comparative purposes.

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Source: Redfin Corporation