rdfn-20200730
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) July 30, 2020
Redfin Corporation
(Exact name of registrant as specified in its charter)
Delaware
001-3816074-3064240
(State or other jurisdiction of incorporation or organization)
(Commission File Number)
(I.R.S. Employer Identification No.)
1099 Stewart Street
Suite 600
Seattle
WA
98101
(Address of principal executive offices)
(Zip Code)
(206)576-8333
Registrant's telephone number, including area code
(Former name, former address and former fiscal year, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, $0.001 par value per shareRDFNThe Nasdaq Global Select Market
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.



Item 2.02 Results of Operations and Financial Condition.

On July 30, 2020, we reported our financial results for the quarter ended June 30, 2020. A copy of our earnings release is furnished as Exhibit 99.1 to this report.

Item 9.01 Financial Statements and Exhibits.
Exhibit Number
Description
99.1
104
Cover page interactive data file, submitted using inline XBRL

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Redfin Corporation
(Registrant)
Date: July 30, 2020/s/ Chris Nielsen
Chris Nielsen
Chief Financial Officer

Document


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Redfin Second-Quarter 2020 Revenue up 8% Year-over-Year to $214 million

SEATTLE - July 30, 2020 - Redfin Corporation (NASDAQ: RDFN) today announced financial results for the second quarter ended June 30, 2020. All financial measures, unless otherwise noted, are presented on a GAAP basis and include stock-based compensation, depreciation and amortization, and expenses related to actions taken in response to COVID-19.

Revenue increased 8% year-over-year to $214 million during the second quarter. Gross profit was $46 million, a decrease of 5% from $48 million in the second quarter of 2019. Real estate services gross profit was $46 million, a decrease of 6% from $49 million in the second quarter of 2019. Real estate services gross margin was 34%, compared to 32% in the second quarter of 2019. Operating expenses were $50 million, a decrease of 17% from $61 million in the second quarter of 2019. Operating expenses were 24% of revenue, down from 31% in the second quarter of 2019.

Net loss was $6.6 million, compared to net loss of $12.6 million in the second quarter of 2019. Dividend on our convertible preferred stock issued in April 2020 was $1.3 million in the second quarter. Net loss attributable to common stock was $7.9 million. Stock-based compensation was $7.2 million, up from $5.9 million in the second quarter of 2019. Depreciation and amortization was $3.6 million, up from $2.2 million in the second quarter of 2019. Interest income was $0.4 million and interest expense was $2.7 million, compared to $1.9 million and $2.2 million, respectively, in the second quarter of 2019. Direct and incremental costs related to COVID-19 were $6.2 million and are included in the general and administrative expenses.

Net loss per share attributable to common stock, basic and diluted, was $0.08, compared to net loss per share, basic and diluted, of $0.14 in the second quarter of 2019.

“Redfin blew away our second-quarter financial targets,” said Redfin CEO Glenn Kelman. “Within the span of a single quarter, year-over-year changes in demand went from -41% to +40%, a level of volatility that I have never seen in nearly 30 years of business. Over the past two months, Redfin’s online visits and customer inquiries have been growing at a faster rate than at any point in the last three years. We’re inside a tornado, hiring agents, lenders and closing specialists at breakneck speed to keep up with demand, but also mindful that the bottom of the economy could fall out a second time.”

Second Quarter Highlights
Reached market share of 0.93% of U.S. existing home sales by value in the second quarter of 2020, a decrease of 0.01 percentage points from the second quarter of 2019 and consistent with the first quarter of 2020.(1)
Saved homebuyers and sellers over $39 million in the second quarter of 2020. This includes the savings Redfin offers buyers through the Redfin Refund and sellers through Redfin’s lower listing fee when compared to a 2.5% listing commission.
Continued to navigate through COVID-19 and adapt to rapid shifts in the housing market and economy by creating new technologies and policies to keep customers and employees safe. Strengthened the company’s long-term competitive advantage as the virtual brokerage leader with new tools and features, including:
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Making it easier for customers to request an in person or virtual tour or listing appointment and giving agents the power to specify their preference for in-person or video appointments within Redfin’s proprietary scheduling software;
Updating the web and mobile search experience to highlight homes with virtual walkthroughs and recorded video tours;
Launching a new Agent Dashboard, allowing agents from any brokerage to upload a video tour or virtual walkthrough to Redfin;
Launching a virtual comparative market analysis presentation for Redfin agents to present to a seller during consultation;
Creating a Shortlist feature, a new way for homebuyers to categorize and highlight the top homes among their Redfin Favorites and communicate preferences with their agent;
Developing new tools for homeowners to easily request a home valuation analysis and more easily compare a RedfinNow cash offer to listing with an agent.
Welcomed back most Redfin employees who were furloughed in early April and resumed hiring in a number of markets to meet resurgence of customer demand.
Developed, produced, and launched new television ads focusing on Redfin’s virtual brokerage capabilities.
Resumed RedfinNow offers in Austin, Boulder, Dallas, Denver, Houston, Inland Empire, Los Angeles, Orange County, San Antonio and San Diego in response to a strengthening housing market.
Expanded self-service technology by launching Direct Access for our home selling customers in 13 markets. This feature allows buyers to self-tour vacant homes listed by Redfin agents, a particularly valuable option for buyers who wish to limit in-person interactions. In the second quarter, we enabled over 300 self-tours of seller-owned homes and more than 750 self-tours of RedfinNow-owned homes.
Recommitted to ongoing efforts to make Redfin a more diverse, inclusive, and equitable workplace and to fight racism and discrimination in the real estate industry, including:
Committing to set diversity-related goals for executives' 2021 performance bonuses;
Reporting on diversity metrics on our quarterly earnings calls;
Extending inclusive management training to all managers in the third quarter; and
Announcing a commitment to launch an executive- and employee-funded philanthropic effort to increase housing access for low-income or under-served communities.
Earned a profit in the Redfin Mortgage business in May and June. Redfin Mortgage expanded to Arizona, Delaware, and New Hampshire and closed its first refinance loan. While the refinancing product is in its infancy, it introduces Redfin Mortgage to a vast new customer base of existing homeowners.
Expanded the brokerage into Anchorage, Alaska. Redfin is now serving customers in 43 states and the District of Columbia and its home search site covers 79% of the U.S. population.

(1) We calculate the aggregate value of U.S. home sales by multiplying the total number of U.S. existing home sales by the mean sale price of these homes, each as reported by the National Association of REALTORS®. We calculate our market share by aggregating the home value of brokerage and partner real estate services transactions. 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 July 30, 2020, and are subject to substantial uncertainty.

For the third quarter of 2020 we expect:
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Total revenue between $214 million and $225 million, representing a year-over-year decrease between 10% and 6% compared to the third quarter of 2019. Properties segment revenue between $10 million and $14 million is included in the guidance provided.
Net income between $18 million and $23 million, compared to net income of $6.8 million in the third quarter of 2019. This guidance includes approximately $8.8 million of expected stock-based compensation and $3.8 million of expected depreciation and amortization. Net income attributable to common stock will include the value of dividend on our convertible preferred stock, which we expect to pay in shares of our common stock.

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 our future operating results, as described under 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 for the year ended December 31, 2019, as supplemented by our quarterly report for the quarter ended June 30, 2020, 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.

About Redfin
Redfin (www.redfin.com) is a technology-powered residential real estate company, redefining real estate in the consumer’s favor in a commission-driven industry. We do this by integrating every step of the home buying and selling process and pairing our own agents with our own technology, creating a service that is faster, better and costs less. We offer brokerage, iBuying, mortgage, and title services, and we also run the country's #1 real estate search site, offering a host of online tools to consumers, including the Redfin Estimate. We represent people buying and selling homes in over 90 markets in the United States and Canada. Since our launch in 2006, we have saved our customers over $800 million and we’ve helped them buy or sell more than 235,000 homes worth more than $115 billion.

Redfin may post updates about COVID-19's impact on the U.S. residential real estate industry or its business on its company blog at www.redfin.com/blog/real-estate-news/. We encourage investors and others interested in our company to review and subscribe to the information we post on our company blog, as some of the information may be material.

Redfin-F

Contacts

Investor Relations
Elena Perron, 206-576-8610
ir@redfin.com

Public Relations
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Mariam Sughayer, 206-876-1322
press@redfin.com
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Redfin Corporation and Subsidiaries
Consolidated Statements of Comprehensive Loss
(in thousands, except share and per share amounts, unaudited)
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Revenue
Service$141,135  $157,872  $252,613  $246,641  
Product72,530  39,908  152,047  61,281  
Total revenue213,665  197,780  404,660  307,922  
Cost of revenue(1)
Service93,891  108,528  192,259  192,923  
Product73,735  40,906  153,483  63,898  
Total cost of revenue167,626  149,434  345,742  256,821  
Gross profit46,039  48,346  58,918  51,101  
Operating expenses
Technology and development(1)
17,961  16,063  38,235  31,620  
Marketing(1)
9,482  27,050  35,190  60,250  
General and administrative(1)(2)
23,022  17,654  47,349  39,102  
Total operating expenses50,465  60,767  120,774  130,972  
Loss from operations(4,426) (12,421) (61,856) (79,871) 
Interest income437  1,913  1,540  4,229  
Interest expense(2,665) (2,153) (5,109) (4,290) 
Other income (expense), net43  36  (1,303) 128  
Net loss$(6,611) $(12,625) $(66,728) $(79,804) 
Dividend on convertible preferred stock(1,284) —  (1,284) —  
Net loss attributable to common stock—basic and diluted(7,895) (12,625) (68,012) (79,804) 
Net loss per share attributable to common stock—basic and diluted$(0.08) $(0.14) $(0.71) $(0.88) 
Weighted average shares of common stock—basic and diluted98,785,318  91,216,886  96,114,012  90,915,334  
Other comprehensive income (loss)
Net loss$(6,611) $(12,625) $(66,728) $(79,804) 
Foreign currency translation adjustments 37  (22) 38  
Unrealized gain (loss) on available-for-sale securities(137)  421   
Total comprehensive loss$(6,745) $(12,582) $(66,329) $(79,760) 

(1) Includes stock-based compensation as follows:
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Cost of revenue$1,769  $1,328  $3,407  $2,793  
Technology and development3,124  2,685  6,772  5,341  
Marketing352  349  727  635  
General and administrative1,960  1,514  3,510  3,513  
Total$7,205  $5,876  $14,416  $12,282  

(2) Includes direct and incremental costs related to COVID-19 of $7,525, which are partially offset by $1,292 in employee retention credits allowed under the CARES Act, for the three and six months ended June 30, 2020
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Redfin Corporation and Subsidiaries
Consolidated Balance Sheets
(in thousands, except share and per share amounts, unaudited)
June 30, 2020December 31, 2019
Assets
Current assets
Cash and cash equivalents$325,352  $234,679  
Restricted cash35,102  12,769  
Short-term investments128,056  70,029  
Accounts receivable, net34,182  19,223  
Inventory9,437  74,590  
Loans held for sale42,439  21,985  
Prepaid expenses7,624  14,822  
Other current assets4,555  3,496  
Total current assets586,747  451,593  
Property and equipment, net41,414  39,577  
Right-of-use assets, net47,697  52,004  
Long-term investments18,792  30,978  
Goodwill and intangibles, net11,260  11,504  
Other non-current assets9,430  10,557  
Total assets$715,340  $596,213  
Liabilities, mezzanine equity and stockholders' equity
Current liabilities
Accounts payable$3,389  $2,122  
Accrued liabilities48,967  38,022  
Other payables27,614  7,884  
Warehouse credit facilities40,566  21,302  
Secured revolving credit facility7,215  4,444  
Current lease liabilities11,614  11,408  
Total current liabilities139,365  85,182  
Non-current lease liabilities54,362  59,869  
Convertible senior notes, net122,884  119,716  
Non-current payroll tax liabilities3,668  —  
Total liabilities320,279  264,767  
Commitments and contingencies
Series A convertible preferred stock—par value $0.001 per share; 10,000,000 shares authorized; 40,000 and no shares issued and outstanding, respectively39,801  —  
Stockholders’ equity
Common stock—par value $0.001 per share; 500,000,000 shares authorized; 99,394,432 and 93,001,597 shares issued and outstanding, respectively99  93  
Additional paid-in capital673,234  583,097  
Accumulated other comprehensive income441  42  
Accumulated deficit(318,514) (251,786) 
Total stockholders’ equity355,260  331,446  
Total liabilities, mezzanine equity and stockholders’ equity$715,340  $596,213  
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Redfin Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands, unaudited)
Six Months Ended June 30,
20202019
Operating Activities
Net loss
$(66,728) $(79,804) 
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization6,865  3,809  
Stock-based compensation14,416  12,282  
Amortization of debt discount and issuance costs3,477  3,031  
Non-cash lease expense4,522  2,943  
Impairment costs1,420  —  
Other(1,190) (100) 
Change in assets and liabilities:
Accounts receivable, net(14,959) (23,323) 
Inventory65,153  (62,960) 
Prepaid expenses and other assets5,446  1,230  
Accounts payable1,040  1,350  
Accrued liabilities, other payables, and non-current payroll tax liabilities14,244  26,489  
Lease liabilities (5,481) (3,301) 
Origination of loans held for sale(294,076) (153,335) 
Proceeds from sale of loans originated as held for sale274,595  128,080  
Net cash provided by (used in) operating activities8,744  (143,609) 
Investing activities
Purchases of property and equipment(6,072) (9,504) 
Purchases of investments(88,724) (70,312) 
Sales of investments3,183  100  
Maturities of investments40,351  —  
Net cash used in investing activities(51,262) (79,716) 
Financing activities
Proceeds from the issuance of convertible preferred stock, net of issuance costs39,801  —  
Proceeds from the issuance of common stock, net of issuance costs69,701  —  
Proceeds from the issuance of shares resulting from employee equity plans11,052  8,965  
Tax payments related to net share settlements on restricted stock units(6,065) (1,792) 
Borrowings from warehouse credit facilities290,891  149,900  
Repayments to warehouse credit facilities(271,627) (125,206) 
Borrowings from secured revolving credit facility39,587  —  
Repayments to secured revolving credit facility(36,816) —  
Other payables—deposits held in escrow19,056  11,602  
Principal payments for finance lease obligations(30) —  
Cash paid for debt issuance costs(4) —  
Net cash provided by financing activities155,546  43,469  
Effect of exchange rate changes on cash and cash equivalents(22) 38  
Net change in cash, cash equivalents, and restricted cash113,006  (179,818) 
Cash, cash equivalents, and restricted cash:
Beginning of period247,448  439,055  
End of period
$360,454  $259,237  
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Redfin Corporation and Subsidiaries
Supplemental Financial Information and Business Metrics
(unaudited)
Three Months Ended
Jun. 30, 2020Mar. 31, 2020Dec. 31, 2019Sep. 30, 2019Jun. 30, 2019Mar. 31, 2019Dec. 31, 2018Sep. 30, 2018Jun. 30, 2018
Monthly average visitors (in thousands)42,537  35,519  30,595  35,633  36,557  31,107  25,212  29,236  28,777  
Real estate services transactions
Brokerage13,828  10,751  13,122  16,098  15,580  8,435  9,822  12,876  12,971  
Partner2,691  2,479  2,958  3,499  3,357  2,125  2,749  3,333  3,289  
Total16,519  13,230  16,080  19,597  18,937  10,560  12,571  16,209  16,260  
Real estate services revenue per transaction
Brokerage$9,296  $9,520  $9,425  $9,075  $9,332  $9,640  $9,569  $9,227  $9,510  
Partner2,417  2,535  2,369  2,295  2,218  2,153  2,232  2,237  2,281  
Aggregate8,175  8,211  8,127  7,865  8,071  8,134  7,964  7,790  8,048  
Aggregate home value of real estate services transactions (in millions)$7,576  $6,098  $7,588  $9,157  $8,986  $4,800  $5,825  $7,653  $7,910  
U.S. market share by value
0.93 %0.93 %0.94 %0.96 %0.94 %0.83 %0.81 %0.85 %0.83 %
Revenue from top-10 Redfin markets as a percentage of real estate services revenue63 %61 %62 %63 %64 %64 %66 %66 %68 %
Average number of lead agents
1,399  1,826  1,526  1,579  1,603  1,503  1,419  1,397  1,415  
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Redfin Corporation and Subsidiaries
Supplemental Financial Information
(unaudited, in thousands)
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Real estate services revenue
Brokerage revenue$128,543  $145,399  $230,894  $226,713  
Partner revenue6,506  7,447  12,791  12,023  
  Total real estate services revenue135,049  152,846  243,685  238,736  
Properties revenue72,184  39,908  151,282  61,281  
Other revenue7,246  5,281  11,496  8,329  
Intercompany eliminations(814) (255) (1,803) (424) 
Total revenue$213,665  $197,780  $404,660  $307,922  
Cost of revenue
Real estate services$88,799  $103,616  $182,361  $184,399  
Properties73,348  40,906  152,647  63,898  
Other6,293  5,167  12,537  8,948  
Intercompany eliminations(814) (255) (1,803) (424) 
Total cost of revenue$167,626  $149,434  $345,742  $256,821  
Gross profit by segment
Real estate services$46,250  $49,230  $61,324  $54,337  
Properties(1,164) (998) (1,365) (2,617) 
Other953  114  (1,041) (619) 
Total gross profit$46,039  $48,346  $58,918  $51,101  
Gross margin (percentage of revenue)
Real estate services34.2 %32.2 %25.2 %22.8 %
Properties(1.6) (2.5) (0.9) (4.3) 
Other13.2  2.2  (9.1) (7.4) 
Total gross margin21.5  24.4  14.6  16.6  

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