Document
false--12-31Q2201900013828211220002440000.00150000000090151341917775379015134191777537P1Y488000488000488000488000488000P1Y0.00110000000000P3YP2Y262110 0001382821 2019-01-01 2019-06-30 0001382821 2019-07-26 0001382821 2018-12-31 0001382821 2019-06-30 0001382821 2019-04-01 2019-06-30 0001382821 us-gaap:ProductMember 2018-04-01 2018-06-30 0001382821 2018-04-01 2018-06-30 0001382821 2018-01-01 2018-06-30 0001382821 us-gaap:ServiceMember 2019-01-01 2019-06-30 0001382821 us-gaap:ServiceMember 2018-04-01 2018-06-30 0001382821 us-gaap:ProductMember 2019-04-01 2019-06-30 0001382821 us-gaap:ProductMember 2019-01-01 2019-06-30 0001382821 us-gaap:ServiceMember 2019-04-01 2019-06-30 0001382821 us-gaap:ServiceMember 2018-01-01 2018-06-30 0001382821 us-gaap:ProductMember 2018-01-01 2018-06-30 0001382821 2018-06-30 0001382821 2017-12-31 0001382821 us-gaap:AdditionalPaidInCapitalMember 2019-01-01 2019-06-30 0001382821 us-gaap:CommonStockMember 2017-12-31 0001382821 us-gaap:CommonStockMember 2019-06-30 0001382821 us-gaap:CommonStockMember 2019-01-01 2019-06-30 0001382821 us-gaap:RetainedEarningsMember 2018-06-30 0001382821 us-gaap:RetainedEarningsMember 2018-12-31 0001382821 us-gaap:RetainedEarningsMember 2019-06-30 0001382821 us-gaap:CommonStockMember 2018-01-01 2018-06-30 0001382821 us-gaap:RetainedEarningsMember 2017-12-31 0001382821 us-gaap:AdditionalPaidInCapitalMember 2017-12-31 0001382821 us-gaap:AdditionalPaidInCapitalMember 2018-01-01 2018-06-30 0001382821 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-06-30 0001382821 us-gaap:CommonStockMember 2018-12-31 0001382821 us-gaap:CommonStockMember 2018-06-30 0001382821 us-gaap:AdditionalPaidInCapitalMember 2018-06-30 0001382821 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-12-31 0001382821 us-gaap:AdditionalPaidInCapitalMember 2019-06-30 0001382821 us-gaap:AdditionalPaidInCapitalMember 2018-12-31 0001382821 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2017-12-31 0001382821 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-01-01 2019-06-30 0001382821 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-06-30 0001382821 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-04-01 2019-06-30 0001382821 2018-03-31 0001382821 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-03-31 0001382821 us-gaap:CommonStockMember 2018-03-31 0001382821 us-gaap:CommonStockMember 2019-04-01 2019-06-30 0001382821 us-gaap:CommonStockMember 2018-04-01 2018-06-30 0001382821 us-gaap:AdditionalPaidInCapitalMember 2019-04-01 2019-06-30 0001382821 us-gaap:AdditionalPaidInCapitalMember 2018-04-01 2018-06-30 0001382821 us-gaap:AdditionalPaidInCapitalMember 2018-03-31 0001382821 us-gaap:CommonStockMember 2019-03-31 0001382821 us-gaap:RetainedEarningsMember 2019-03-31 0001382821 us-gaap:AdditionalPaidInCapitalMember 2019-03-31 0001382821 us-gaap:RetainedEarningsMember 2018-03-31 0001382821 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-03-31 0001382821 us-gaap:RetainedEarningsMember 2019-04-01 2019-06-30 0001382821 2019-03-31 0001382821 2018-12-01 2018-12-31 0001382821 us-gaap:SoftwareDevelopmentMember 2019-01-01 2019-06-30 0001382821 us-gaap:AccountingStandardsUpdate201602Member 2019-01-01 0001382821 us-gaap:SoftwareDevelopmentMember 2018-01-01 2018-12-31 0001382821 us-gaap:IntersegmentEliminationMember 2019-04-01 2019-06-30 0001382821 us-gaap:OperatingSegmentsMember rdfn:PropertiesSegmentMember 2018-01-01 2018-06-30 0001382821 us-gaap:OperatingSegmentsMember rdfn:RealEstateSegmentMember 2018-04-01 2018-06-30 0001382821 us-gaap:IntersegmentEliminationMember 2018-04-01 2018-06-30 0001382821 us-gaap:OperatingSegmentsMember rdfn:BrokerageRevenueMember rdfn:RealEstateSegmentMember 2019-01-01 2019-06-30 0001382821 us-gaap:OperatingSegmentsMember rdfn:BrokerageRevenueMember rdfn:RealEstateSegmentMember 2018-04-01 2018-06-30 0001382821 us-gaap:IntersegmentEliminationMember 2019-01-01 2019-06-30 0001382821 us-gaap:OperatingSegmentsMember rdfn:RealEstateSegmentMember 2019-04-01 2019-06-30 0001382821 us-gaap:CorporateNonSegmentMember 2019-01-01 2019-06-30 0001382821 us-gaap:OperatingSegmentsMember rdfn:RealEstateSegmentMember 2019-01-01 2019-06-30 0001382821 us-gaap:OperatingSegmentsMember rdfn:PropertiesSegmentMember 2019-04-01 2019-06-30 0001382821 us-gaap:CorporateNonSegmentMember 2019-04-01 2019-06-30 0001382821 us-gaap:IntersegmentEliminationMember 2018-01-01 2018-06-30 0001382821 us-gaap:OperatingSegmentsMember rdfn:RealEstateSegmentMember 2018-01-01 2018-06-30 0001382821 us-gaap:OperatingSegmentsMember rdfn:PropertiesSegmentMember 2018-04-01 2018-06-30 0001382821 us-gaap:OperatingSegmentsMember rdfn:PropertiesSegmentMember 2019-01-01 2019-06-30 0001382821 us-gaap:CorporateNonSegmentMember 2018-01-01 2018-06-30 0001382821 us-gaap:OperatingSegmentsMember rdfn:PartnerRevenueMember rdfn:RealEstateSegmentMember 2019-04-01 2019-06-30 0001382821 us-gaap:OperatingSegmentsMember rdfn:PartnerRevenueMember rdfn:RealEstateSegmentMember 2018-04-01 2018-06-30 0001382821 us-gaap:CorporateNonSegmentMember 2018-04-01 2018-06-30 0001382821 us-gaap:OperatingSegmentsMember rdfn:BrokerageRevenueMember rdfn:RealEstateSegmentMember 2019-04-01 2019-06-30 0001382821 us-gaap:OperatingSegmentsMember rdfn:PartnerRevenueMember rdfn:RealEstateSegmentMember 2018-01-01 2018-06-30 0001382821 us-gaap:OperatingSegmentsMember rdfn:BrokerageRevenueMember rdfn:RealEstateSegmentMember 2018-01-01 2018-06-30 0001382821 us-gaap:OperatingSegmentsMember rdfn:PartnerRevenueMember rdfn:RealEstateSegmentMember 2019-01-01 2019-06-30 0001382821 rdfn:A1.75ConvertibleSeniorNotesdue2023Member 2018-07-23 0001382821 us-gaap:FairValueMeasurementsRecurringMember us-gaap:USTreasurySecuritiesMember 2019-06-30 0001382821 us-gaap:FairValueMeasurementsRecurringMember 2019-06-30 0001382821 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2019-06-30 0001382821 us-gaap:MoneyMarketFundsMember us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2019-06-30 0001382821 us-gaap:FairValueMeasurementsRecurringMember us-gaap:InterestRateLockCommitmentsMember 2019-06-30 0001382821 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USTreasurySecuritiesMember 2019-06-30 0001382821 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USTreasurySecuritiesMember 2019-06-30 0001382821 us-gaap:FairValueMeasurementsRecurringMember us-gaap:ForwardContractsMember 2019-06-30 0001382821 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USTreasurySecuritiesMember 2019-06-30 0001382821 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:ForwardContractsMember 2019-06-30 0001382821 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:ForwardContractsMember 2019-06-30 0001382821 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:InterestRateLockCommitmentsMember 2019-06-30 0001382821 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2019-06-30 0001382821 us-gaap:MoneyMarketFundsMember us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2019-06-30 0001382821 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:InterestRateLockCommitmentsMember 2019-06-30 0001382821 us-gaap:MoneyMarketFundsMember us-gaap:FairValueMeasurementsRecurringMember 2019-06-30 0001382821 us-gaap:USTreasurySecuritiesMember us-gaap:FairValueMeasurementsRecurringMember 2019-06-30 0001382821 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2019-06-30 0001382821 us-gaap:USTreasurySecuritiesMember us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2019-06-30 0001382821 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:InterestRateLockCommitmentsMember 2019-06-30 0001382821 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:ForwardContractsMember 2019-06-30 0001382821 us-gaap:USTreasurySecuritiesMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2019-06-30 0001382821 us-gaap:MoneyMarketFundsMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2019-06-30 0001382821 us-gaap:USTreasurySecuritiesMember us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2019-06-30 0001382821 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2018-12-31 0001382821 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:ForwardContractsMember 2018-12-31 0001382821 us-gaap:FairValueMeasurementsRecurringMember 2018-12-31 0001382821 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2018-12-31 0001382821 us-gaap:MoneyMarketFundsMember us-gaap:FairValueMeasurementsRecurringMember 2018-12-31 0001382821 us-gaap:FairValueMeasurementsRecurringMember us-gaap:ForwardContractsMember 2018-12-31 0001382821 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2018-12-31 0001382821 us-gaap:FairValueMeasurementsRecurringMember us-gaap:InterestRateLockCommitmentsMember 2018-12-31 0001382821 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:ForwardContractsMember 2018-12-31 0001382821 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:InterestRateLockCommitmentsMember 2018-12-31 0001382821 us-gaap:MoneyMarketFundsMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2018-12-31 0001382821 us-gaap:MoneyMarketFundsMember us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2018-12-31 0001382821 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:ForwardContractsMember 2018-12-31 0001382821 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:InterestRateLockCommitmentsMember 2018-12-31 0001382821 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:InterestRateLockCommitmentsMember 2018-12-31 0001382821 us-gaap:MoneyMarketFundsMember us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2018-12-31 0001382821 us-gaap:FurnitureAndFixturesMember 2019-06-30 0001382821 us-gaap:LeaseholdImprovementsMember 2019-06-30 0001382821 us-gaap:SoftwareDevelopmentMember 2018-12-31 0001382821 us-gaap:OfficeEquipmentMember 2019-01-01 2019-06-30 0001382821 us-gaap:OfficeEquipmentMember 2018-12-31 0001382821 us-gaap:FurnitureAndFixturesMember 2018-12-31 0001382821 us-gaap:SoftwareDevelopmentMember 2019-06-30 0001382821 us-gaap:FurnitureAndFixturesMember 2019-01-01 2019-06-30 0001382821 rdfn:SoftwareMember 2019-01-01 2019-06-30 0001382821 us-gaap:LeaseholdImprovementsMember 2018-12-31 0001382821 rdfn:SoftwareMember 2018-12-31 0001382821 us-gaap:OfficeEquipmentMember 2019-06-30 0001382821 rdfn:SoftwareMember 2019-06-30 0001382821 srt:MaximumMember us-gaap:SoftwareDevelopmentMember 2019-01-01 2019-06-30 0001382821 srt:MinimumMember us-gaap:SoftwareDevelopmentMember 2019-01-01 2019-06-30 0001382821 us-gaap:CostOfSalesMember 2019-01-01 2019-06-30 0001382821 us-gaap:SellingGeneralAndAdministrativeExpensesMember 2019-04-01 2019-06-30 0001382821 us-gaap:SellingGeneralAndAdministrativeExpensesMember 2019-01-01 2019-06-30 0001382821 us-gaap:CostOfSalesMember 2019-04-01 2019-06-30 0001382821 srt:MaximumMember 2019-06-30 0001382821 srt:MinimumMember 2019-06-30 0001382821 us-gaap:DevelopedTechnologyRightsMember 2019-06-30 0001382821 us-gaap:TradeNamesMember 2018-12-31 0001382821 us-gaap:DevelopedTechnologyRightsMember 2018-12-31 0001382821 us-gaap:TradeNamesMember 2019-06-30 0001382821 us-gaap:DevelopedTechnologyRightsMember 2019-01-01 2019-06-30 0001382821 us-gaap:CustomerRelationshipsMember 2019-01-01 2019-06-30 0001382821 us-gaap:CustomerRelationshipsMember 2018-12-31 0001382821 us-gaap:TradeNamesMember 2019-01-01 2019-06-30 0001382821 us-gaap:CustomerRelationshipsMember 2019-06-30 0001382821 rdfn:A2017EmployeeStockPurchasePlanMember 2019-06-30 0001382821 rdfn:A2017EmployeeStockPurchasePlanMember 2018-12-31 0001382821 us-gaap:GeneralAndAdministrativeExpenseMember 2018-04-01 2018-06-30 0001382821 us-gaap:ResearchAndDevelopmentExpenseMember 2018-04-01 2018-06-30 0001382821 us-gaap:ResearchAndDevelopmentExpenseMember 2019-01-01 2019-06-30 0001382821 us-gaap:GeneralAndAdministrativeExpenseMember 2019-01-01 2019-06-30 0001382821 us-gaap:SellingAndMarketingExpenseMember 2018-01-01 2018-06-30 0001382821 us-gaap:GeneralAndAdministrativeExpenseMember 2018-01-01 2018-06-30 0001382821 us-gaap:ResearchAndDevelopmentExpenseMember 2019-04-01 2019-06-30 0001382821 us-gaap:GeneralAndAdministrativeExpenseMember 2019-04-01 2019-06-30 0001382821 us-gaap:SellingAndMarketingExpenseMember 2019-04-01 2019-06-30 0001382821 us-gaap:ResearchAndDevelopmentExpenseMember 2018-01-01 2018-06-30 0001382821 us-gaap:SellingAndMarketingExpenseMember 2019-01-01 2019-06-30 0001382821 us-gaap:CostOfSalesMember 2018-01-01 2018-06-30 0001382821 us-gaap:SellingAndMarketingExpenseMember 2018-04-01 2018-06-30 0001382821 us-gaap:CostOfSalesMember 2018-04-01 2018-06-30 0001382821 2018-01-01 2018-12-31 0001382821 us-gaap:RestrictedStockUnitsRSUMember 2018-12-31 0001382821 us-gaap:RestrictedStockUnitsRSUMember 2019-01-01 2019-06-30 0001382821 us-gaap:RestrictedStockUnitsRSUMember 2019-06-30 0001382821 rdfn:A2017EquityIncentivePlanMember 2018-12-31 0001382821 rdfn:A2017EquityIncentivePlanMember 2019-06-30 0001382821 srt:MaximumMember srt:ChiefExecutiveOfficerMember us-gaap:PerformanceSharesMember 2019-06-01 2019-06-01 0001382821 us-gaap:EmployeeStockOptionMember 2019-01-01 2019-06-30 0001382821 rdfn:JanuaryToJune2019AwardsMember rdfn:PerformanceRestrictedStockUnitsMember 2019-01-01 2019-06-30 0001382821 srt:ChiefExecutiveOfficerMember us-gaap:PerformanceSharesMember 2019-06-01 2019-06-01 0001382821 us-gaap:EmployeeStockMember rdfn:A2017EmployeeStockPurchasePlanMember 2017-07-27 2017-07-27 0001382821 rdfn:A2017EquityIncentivePlanMember 2017-07-26 0001382821 us-gaap:EmployeeStockMember rdfn:A2017EmployeeStockPurchasePlanMember 2017-07-27 0001382821 us-gaap:EmployeeStockMember rdfn:A2004EquityIncentivePlanMember 2019-06-30 0001382821 rdfn:JanuaryToDecember2019AwardsMember rdfn:PerformanceRestrictedStockUnitsMember 2019-01-01 2019-06-30 0001382821 rdfn:PerformanceRestrictedStockUnitsMember 2019-06-30 0001382821 rdfn:PerformanceRestrictedStockUnitsMember 2019-01-01 2019-06-30 0001382821 rdfn:A2017EmployeeStockPurchasePlanMember 2019-04-01 2019-06-30 0001382821 rdfn:PerformanceRestrictedStockUnitsMember 2019-04-01 2019-06-30 0001382821 rdfn:A2017EquityIncentivePlanMember 2017-07-26 2017-07-26 0001382821 rdfn:A2017EmployeeStockPurchasePlanMember 2019-01-01 2019-06-30 0001382821 us-gaap:EmployeeStockMember 2019-01-01 2019-06-30 0001382821 us-gaap:EmployeeStockOptionMember 2018-04-01 2018-06-30 0001382821 us-gaap:EmployeeStockOptionMember 2019-04-01 2019-06-30 0001382821 us-gaap:RestrictedStockUnitsRSUMember 2019-04-01 2019-06-30 0001382821 us-gaap:EmployeeStockOptionMember 2018-01-01 2018-06-30 0001382821 us-gaap:EmployeeStockMember 2018-04-01 2018-06-30 0001382821 us-gaap:EmployeeStockMember 2018-01-01 2018-06-30 0001382821 us-gaap:EmployeeStockMember 2019-04-01 2019-06-30 0001382821 us-gaap:EmployeeStockOptionMember 2019-01-01 2019-06-30 0001382821 us-gaap:RestrictedStockUnitsRSUMember 2018-04-01 2018-06-30 0001382821 us-gaap:RestrictedStockUnitsRSUMember 2018-01-01 2018-06-30 0001382821 us-gaap:RestrictedStockUnitsRSUMember 2019-01-01 2019-06-30 0001382821 2017-03-31 0001382821 us-gaap:DomesticCountryMember 2018-12-31 0001382821 us-gaap:StateAndLocalJurisdictionMember 2018-12-31 0001382821 rdfn:A1.75ConvertibleSeniorNotesdue2023Member 2019-06-30 0001382821 rdfn:A1.75ConvertibleSeniorNotesdue2023Member 2019-04-01 2019-06-30 0001382821 us-gaap:WarehouseAgreementBorrowingsMember rdfn:TexasCapitalBankNationalAssociationMember 2019-06-30 0001382821 us-gaap:WarehouseAgreementBorrowingsMember rdfn:WesternAllianceBankMember 2019-06-30 0001382821 us-gaap:WarehouseAgreementBorrowingsMember 2019-06-30 0001382821 us-gaap:WarehouseAgreementBorrowingsMember 2018-12-31 0001382821 us-gaap:WarehouseAgreementBorrowingsMember rdfn:TexasCapitalBankNationalAssociationMember 2018-12-31 0001382821 us-gaap:WarehouseAgreementBorrowingsMember rdfn:WesternAllianceBankMember 2018-12-31 0001382821 rdfn:A1.75ConvertibleSeniorNotesdue2023Member 2018-12-31 0001382821 us-gaap:WarehouseAgreementBorrowingsMember rdfn:WesternAllianceBankMember us-gaap:LondonInterbankOfferedRateLIBORMember 2019-01-01 2019-06-30 0001382821 rdfn:A1.75ConvertibleSeniorNotesdue2023Member us-gaap:FairValueInputsLevel2Member 2019-06-30 0001382821 rdfn:A1.75ConvertibleSeniorNotesdue2023Member us-gaap:FairValueInputsLevel2Member 2018-12-31 0001382821 us-gaap:WarehouseAgreementBorrowingsMember rdfn:TexasCapitalBankNationalAssociationMember 2019-01-01 2019-06-30 0001382821 us-gaap:RevolvingCreditFacilityMember rdfn:LoanAgreementMember us-gaap:SecuredDebtMember us-gaap:SubsequentEventMember 2019-07-26 2019-07-26 0001382821 us-gaap:WarehouseAgreementBorrowingsMember rdfn:TexasCapitalBankNationalAssociationMember us-gaap:SubsequentEventMember 2019-07-30 0001382821 us-gaap:RevolvingCreditFacilityMember rdfn:LoanAgreementMember us-gaap:SecuredDebtMember us-gaap:SubsequentEventMember us-gaap:LondonInterbankOfferedRateLIBORMember 2019-07-26 2019-07-26 0001382821 us-gaap:RevolvingCreditFacilityMember rdfn:LoanAgreementMember us-gaap:SecuredDebtMember us-gaap:SubsequentEventMember 2019-07-26 xbrli:pure rdfn:investment_type iso4217:USD iso4217:USD xbrli:shares rdfn:segment xbrli:shares
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2019

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___ to ___

Commission file number 001-38160
Redfin Corporation
(Exact name of registrant as specified in its charter)

Delaware
 
74-3064240
(State or other jurisdiction of incorporation or organization)
 
(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)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Common Stock, $0.001 par value per share
RDFN
The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
 
 
 
 
Yes
 No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
 
 
 
 
Yes
 No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
Accelerated filer
Non-accelerated filer  
Smaller reporting company
 
 
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.
 
 

 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 
 
 
 
 Yes
 No

The registrant had outstanding 91,834,413 shares of common stock as of July 26, 2019.




Redfin Corporation

Quarterly Report on Form 10-Q
For the Quarter Ended June 30, 2019

Table of Contents

 
 
 
PART I
 
Page
Item 1.
 
 
 
 
 
Item 2.
Item 3.
Item 4.
 
 
 
PART II
 
 
Item 1A.
Item 2.
Item 5.
Item 6.
 
 
 
 
 




As used in this Quarterly Report on Form 10-Q (this "Quarterly Report"), the terms "Redfin," "the Company," "we," "us," and "our" refer to Redfin Corporation and its subsidiaries taken as a whole, unless otherwise noted or unless the context indicates otherwise.

Note Regarding Forward-Looking Statements

This Quarterly Report contains forward-looking statements. All statements contained in this report other than statements of historical fact, including statements regarding our future operating results and financial position, our business strategy and plans, our market growth and trends, and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “could,” “would,” “project,” “plan,” “potentially,” “preliminary,” “likely,” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including those described under Item 1A of our Annual Report for the year ended December 31, 2018, as supplemented by Part II, Item 1A of this Quarterly Report. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the effect of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the future events and trends discussed in this report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Accordingly, you should not rely on forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, performance, or events and circumstances reflected in the forward-looking statements will be achieved or occur. We undertake no obligation to update any of these forward-looking statements for any reason after the date of this report or to conform these statements to actual results or revised expectations.

Note Regarding Industry and Market Data

This Quarterly Report contains information using industry publications that generally state that the information contained therein has been obtained from sources believed to be reliable, but such information may not be accurate or complete. While we are not aware of any misstatements regarding the information from these industry publications, we have not independently verified any of the data from third-party sources nor have we ascertained the underlying economic assumptions relied on therein.



Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

Redfin Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except share and per share amounts, unaudited)
 
June 30, 2019
 
December 31, 2018
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
241,104

 
$
432,608

Restricted cash
18,133

 
6,446

Short-term investments
35,365

 

Accrued revenue, net
38,686

 
15,363

Inventory
85,654

 
22,694

Loans held for sale
30,169

 
4,913

Prepaid expenses
6,763

 
11,916

Other current assets
5,860

 
2,307

Total current assets
461,734

 
496,247

Long-term investments
34,954

 

Property and equipment, net
35,675

 
25,187

Right of use assets, net
44,830

 

Goodwill and intangibles, net
11,748

 
11,992

Other non-current assets
10,627

 
9,395

Total assets
599,568

 
542,821

Liabilities and stockholders' equity
 
 
 
Current liabilities
 
 
 
Accounts payable
4,217

 
2,516

Accrued liabilities
57,423

 
30,837

Other payables
18,250

 
6,544

Borrowings under warehouse credit facilities
29,427

 
4,733

Current operating lease liabilities
8,719

 

Current portion of deferred rent
36

 
1,588

Total current liabilities
118,072

 
46,218

Non-current operating lease liabilities
52,634

 

Deferred rent

 
11,079

Convertible senior notes, net
116,617

 
113,586

Total liabilities
287,323

 
170,883

Commitments and contingencies (Note 7)

 

Stockholders’ equity
 
 
 
Common stock—par value $0.001 per share; 500,000,000 shares authorized; 91,777,537 and 90,151,341 shares issued and outstanding, respectively
92

 
90

Additional paid-in capital
562,894

 
542,829

Accumulated other comprehensive income
44

 

Accumulated deficit
(250,785
)
 
(170,981
)
Total stockholders’ equity
312,245

 
371,938

Total liabilities and stockholders’ equity
$
599,568

 
$
542,821


The accompanying notes are an integral part of these condensed consolidated financial statements.

1

Table of Contents

Redfin Corporation and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income (Loss)
(in thousands, except share and per share amounts, unaudited)
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2019
 
2018
 
2019
 
2018
Revenue
 
 
 
 
 
 
 
Service
$
157,872

 
$
133,656

 
$
246,641

 
$
210,498

Product
39,908

 
8,986

 
61,281

 
12,038

Total revenue
197,780

 
142,642

 
307,922

 
222,536

Cost of revenue
 
 
 
 
 
 
 
Service
108,528

 
88,341

 
192,923

 
159,196

Product
40,906

 
9,088

 
63,898

 
12,430

Total cost of revenue
149,434

 
97,429

 
256,821

 
171,626

Gross profit
48,346

 
45,213

 
51,101

 
50,910

Operating expenses
 
 
 
 
 
 
 
Technology and development
16,063

 
13,033

 
31,620

 
25,796

Marketing
27,050

 
14,435

 
60,250

 
27,770

General and administrative
17,654

 
15,288

 
39,102

 
32,062

Total operating expenses
60,767

 
42,756

 
130,972

 
85,628

Income (loss) from operations
(12,421
)
 
2,457

 
(79,871
)
 
(34,718
)
Interest income
1,913

 
729

 
4,229

 
1,307

Interest expense
(2,153
)
 

 
(4,290
)
 

Other income, net
36

 
21

 
128

 
179

Net income (loss)
$
(12,625
)
 
$
3,207

 
$
(79,804
)
 
$
(33,232
)
Net income (loss) per share - basic
$
(0.14
)
 
$
0.04

 
$
(0.88
)
 
$
(0.40
)
Net income (loss) per share - diluted
$
(0.14
)
 
$
0.04

 
$
(0.88
)
 
$
(0.40
)
Weighted average shares - basic
91,216,886

 
83,164,670

 
90,915,334

 
82,590,979

Weighted average shares - diluted
91,216,886

 
90,743,178

 
90,915,334

 
82,590,979

 
 
 
 
 
 
 
 
Net income (loss)
$
(12,625
)
 
$
3,207

 
$
(79,804
)
 
$
(33,232
)
Other comprehensive income:
 
 
 
 
 
 
 
Foreign currency translation adjustments
37

 

 
38

 

Unrealized gain on available-for-sale securities
6

 

 
6

 

Total comprehensive income (loss)
$
(12,582
)
 
$
3,207

 
$
(79,760
)
 
$
(33,232
)

The accompanying notes are an integral part of these condensed consolidated financial statements.

2

Table of Contents

Redfin Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands, unaudited)
 
Six Months Ended
June 30,
 
2019
 
2018
Operating activities
 
 
 
Net loss
$
(79,804
)
 
$
(33,232
)
Adjustments to reconcile net loss to net cash used in operating activities
 
 
 
Depreciation and amortization
3,809

 
3,902

Stock-based compensation
12,282

 
8,974

Amortization of debt discount and issuance costs
3,031

 

Non-cash lease expense
2,943

 

Other
(100
)
 

Change in assets and liabilities
 
 
 
Accrued revenue
(23,323
)
 
(5,568
)
Inventory
(62,960
)
 
(11,137
)
Prepaid expenses and other assets
1,230

 
3,682

Accounts payable
1,350

 
1,934

Accrued liabilities and other payables
26,494

 
7,481

Operating lease liabilities
(3,301
)
 

Deferred rent
(5
)
 
(583
)
Origination of loans held for sale
(153,335
)
 
(29,249
)
Proceeds from sale of loans originated as held for sale
128,080

 
27,555

Net cash used in operating activities
(143,609
)
 
(26,241
)
Investing activities
 
 
 
Purchases of investments
(70,312
)
 

Sales of investments
100

 

Purchases of property and equipment
(9,504
)
 
(4,045
)
Net cash used in investing activities
(79,716
)
 
(4,045
)
Financing activities
 
 
 
Proceeds from the exercise of stock options
8,965

 
14,394

Tax payments related to net share settlements on restricted stock units
(1,792
)
 
(227
)
Borrowings from warehouse credit facilities
149,900

 
28,551

Repayments of warehouse credit facilities
(125,206
)
 
(27,076
)
Other payables - deposits held in escrow
11,602

 
13,631

Net cash provided by financing activities
43,469

 
29,273

Effect of exchange rate changes on cash and cash equivalents
38

 

Net change in cash, cash equivalents, and restricted cash
(179,818
)
 
(1,013
)
Cash, cash equivalents, and restricted cash
 
 
 
Beginning of period
439,055

 
212,658

End of period
$
259,237

 
$
211,645

Supplemental disclosure of cash flow information
 
 
 
Cash paid for interest
$
1,202

 
$

    Non-cash transactions
 
 
 
Stock-based compensation capitalized in property and equipment
(561
)
 
(244
)
Property and equipment additions in accounts payable and accrued liabilities
(620
)
 
(21
)
Leasehold improvements paid directly by lessor
(3,444
)
 
(926
)

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

Table of Contents

Redfin Corporation and Subsidiaries
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(in thousands, except share amounts, unaudited)

 
Common Stock
 
Additional
Paid-in Capital
 
Accumulated Deficit
 
Accumulated Other Comprehensive Income
 
Total Stockholders' Equity
 
Shares
 
Amount
 
 
 
 
Balance, March 31, 2018
82,672,592

 
$
83

 
$
374,614

 
$
(165,442
)
 
$

 
$
209,255

Issuance of common stock pursuant to employee stock purchase program
187,076

 

 
3,671

 

 

 
3,671

Issuance of common stock pursuant to exercise of stock options
909,753

 
1

 
4,749

 

 

 
4,750

Issuance of common stock pursuant to settlement of restricted stock units
23,490

 

 

 

 

 

Common stock surrendered for employees' tax liability upon settlement of restricted stock units
(7,660
)
 

 
(167
)
 

 

 
(167
)
Stock-based compensation

 

 
4,897

 

 

 
4,897

Net income

 

 

 
3,207

 

 
3,207

Balance, June 30, 2018
83,785,251

 
$
84

 
$
387,764

 
$
(162,235
)
 
$

 
$
225,613

 
 
 
 
 
 
 
 
 
 
 
 
Balance, March 31, 2019
90,926,249

 
$
91

 
$
552,418

 
$
(238,160
)
 
$
1

 
$
314,349

Issuance of common stock pursuant to employee stock purchase program
262,110

 

 
3,246

 

 

 
3,246

Issuance of common stock pursuant to exercise of stock options
420,104

 
1

 
2,038

 

 

 
2,039

Issuance of common stock pursuant to settlement of restricted stock units
227,026

 

 

 

 

 

Common stock surrendered for employees' tax liability upon settlement of restricted stock units
(57,952
)
 

 
(975
)
 

 

 
(975
)
Stock-based compensation

 

 
6,167

 

 

 
6,167

Other comprehensive income

 

 

 

 
43

 
43

Net loss

 

 

 
(12,625
)
 

 
(12,625
)
Balance, June 30, 2019
91,777,537

 
$
92

 
$
562,894

 
$
(250,785
)
 
$
44

 
$
312,245




4

Table of Contents

 
Common Stock
 
Additional
Paid-in Capital
 
Accumulated Deficit
 
Accumulated Other Comprehensive Income
 
Total Stockholders' Equity
 
Shares
 
Amount
 
 
 
 
Balance, December 31, 2017
81,468,891

 
$
81

 
$
364,352

 
$
(129,003
)
 
$

 
$
235,430

Issuance of common stock pursuant to employee stock purchase program
187,076

 

 
3,671

 

 

 
3,671

Issuance of common stock pursuant to exercise of stock options
2,108,485

 
3

 
10,750

 

 

 
10,753

Issuance of common stock pursuant to settlement of restricted stock units
31,022

 

 

 

 

 

Common stock surrendered for employees' tax liability upon settlement of restricted stock units
(10,223
)
 

 
(227
)
 

 

 
(227
)
Stock-based compensation

 

 
9,218

 

 

 
9,218

Net loss

 

 

 
(33,232
)
 

 
(33,232
)
Balance, June 30, 2018
83,785,251

 
$
84

 
$
387,764

 
$
(162,235
)
 
$

 
$
225,613

 
 
 
 
 
 
 
 
 
 
 
 
Balance, December 31, 2018
90,151,341

 
$
90

 
$
542,829

 
$
(170,981
)
 
$

 
$
371,938

Issuance of common stock pursuant to employee stock purchase program
262,110

 

 
3,246

 

 

 
3,246

Issuance of common stock pursuant to exercise of stock options
1,099,599

 
2

 
5,768

 

 

 
5,770

Issuance of common stock pursuant to settlement of restricted stock units
366,915

 

 

 

 

 

Common stock surrendered for employees' tax liability upon settlement of restricted stock units
(102,428
)
 

 
(1,792
)
 

 

 
(1,792
)
Stock-based compensation

 

 
12,843

 

 

 
12,843

Other comprehensive income

 

 

 

 
44

 
44

Net loss

 

 

 
(79,804
)
 

 
(79,804
)
Balance, June 30, 2019
91,777,537

 
$
92

 
$
562,894

 
$
(250,785
)
 
$
44

 
$
312,245


The accompanying notes are an integral part of these condensed consolidated financial statements.


5

Table of Contents

Index to Notes to Condensed Consolidated Financial Statements

 
 
 
Note 1:
Note 2:
Note 3:
Note 4:
Note 5:
Note 6:
Note 7:
Note 8:
Note 9:
Note 10:
Note 11:
Note 12:
Note 13:
Note 14:
Note 15:




6

Table of Contents

Notes to Condensed Consolidated Financial Statements
(in thousands, except for shares and per share amounts, unaudited)

Note 1: Summary of Significant Accounting Policies

Basis of Presentation—The consolidated financial statements and accompanying notes have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”). All amounts are presented in thousands, except share and per share data.

The financial information as of December 31, 2018 is derived from the audited consolidated financial statements and notes for the year ended December 31, 2018 included in Item 8 in the Annual Report on Form 10-K (the “2018 Annual Report”) of Redfin Corporation (the "Company" or "Redfin"). The information included in this Quarterly Report should be read in conjunction with the notes and management’s discussion and analysis of the consolidated financial statements included in the 2018 Annual Report.

The unaudited condensed consolidated financial statements, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the Company's financial position as of June 30, 2019, the statements of comprehensive income (loss) and stockholders' equity for the three and six months ended June 30, 2019 and 2018, and the statement of cash flows for the six months ended June 30, 2019 and 2018. The results for the three and six months ended June 30, 2019 are not necessarily indicative of the results to be expected for the year ending December 31, 2019 or for any interim period or for any other future year.

Principles of Consolidation—The unaudited condensed consolidated interim financial statements include the accounts of Redfin and its wholly owned subsidiaries. Intercompany transactions and balances have been eliminated.

Use of EstimatesThe preparation of consolidated financial statements, in conformity with GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and results of operations during the respective periods. The Company evaluates its estimates on an ongoing basis. During the six months ended June 30, 2019, the estimated useful life of capitalized software for internal use was updated from one to two years. This change in estimate was not material. In addition, with the adoption of Accounting Standards Codification Topic 842, Leases ("ASC 842" or "Topic 842"), the Company estimated its incremental borrowing rate for the determination of the present value of lease payments. Further description of the impact of this pronouncement is included in Note 6: Leases. The amounts ultimately realized from the affected assets or liabilities will depend on, among other factors, general business conditions and could differ materially in the near term from the carrying amounts reflected in the consolidated financial statements.

Cash and Cash Equivalents—Cash equivalents consist primarily of money market instruments and U.S. treasury securities. The Company considers all highly liquid investments originally purchased by the Company with original maturities of three months or less at the date of purchase to be cash equivalents and classified as available-for-sale.

Investments—The Company has two types of investments; available-for-sale investments that are available to support operational needs of the Company, which are reported on the balance sheet as short-term and long-term investments, and long-term equity investments accounted for under the cost method, which are reported in other non-current assets.

Available-for-sale

The Company's short-term and long-term investments consist primarily of U.S. treasury securities, all of which are classified as available-for-sale. Available-for-sale debt securities are recorded at fair value, and unrealized holding gains and losses are recorded as a component of accumulated other comprehensive income. Available-for-sale securities with maturities of one year or less and those identified

7


by management at the time of purchase to be used to fund operations within one year are classified as short-term. All other available-for-sale securities are classified as long-term. The Company evaluates its available-for-sale securities, both ones classified as cash equivalents and as investments, for other-than-temporary impairment on a quarterly basis. Unrealized losses are charged against net earnings when a decline in fair value is determined to be other than temporary. The Company reviews factors to determine whether a loss is other than temporary, such as the length and extent of the fair value decline, the financial condition and near-term prospects of the issuer, and whether the Company has the intent to sell or will more likely than not be required to sell before the securities' anticipated recovery, which may be at maturity. Realized gains and losses are accounted for using the specific identification method. Purchases and sales are recorded on a trade date basis. There were no other than temporary impairments during the periods presented.

Cost Method Investments

In December 2018, the Company purchased an equity interest in a privately held company for approximately $2,000 which is classified as long-term. The investment is an equity security without a readily determinable fair value that is accounted for at cost minus any impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer. The Company performs a qualitative assessment considering impairment indicators to evaluate whether the investment is impaired as of the end of each reporting period.

Advertising and Advertising Production Costs—The Company expenses advertising costs as they are incurred and production costs as of the first date the advertisement takes place. Advertising costs totaled $23,845 and $12,048 for the three months ended June 30, 2019 and 2018, respectively, and $54,078 and $23,231 for the six months ended June 30, 2019 and 2018, respectively, and are included in marketing expenses. Advertising production costs totaled $101 and $25 for the three months ended June 30, 2019 and 2018, respectively, and $149 and $13 for the six months ended June 30, 2019 and 2018, respectively, and are included in marketing expenses.

Recently Adopted Accounting Pronouncements—In January 2019, the Company adopted ASU 2016-02, Leases (Topic 842), using the optional alternative transition method under ASU 2018-11, Leases (Topic 842) Targeted Improvements. The optional alternative transition method applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company evaluated its portfolio of leases and determined a cumulative-effect adjustment to the opening balance of retained earnings was not needed, as the portfolio of leases contains only operating leases.

The Company elected the package of practical expedients permitted under the transition guidance within the standard, allowing the Company to carry forward the historical lease classification, carry forward the conclusions on whether current or expired contracts contain leases, and carry forward the accounting for initial direct costs for existing leases. Additionally, the Company elected the practical expedient for use of hindsight to determine the lease term for existing leases whereby it evaluated the performance of existing leases in relation to our leasing strategy and determined that most renewal options would not be reasonably certain to be exercised. This resulted in the shortening of lease terms for the existing leases.

Adoption of the standard resulted in the recording of right of use assets and corresponding lease liabilities of $33,953 and $49,395, respectively, as of January 1, 2019, the difference of which is due to lease incentives. Further description of the impact of this pronouncement is included in Note 6: Leases.

In January 2019, the Company adopted the guidance in the U.S. Securities and Exchange Commission (the "SEC") final rule under SEC Release No. 33-10532, Disclosure Update and Simplification. In August 2018, the SEC issued the final rule amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated, or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders' equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders' equity presented in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the

8


beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed.

Recently Issued Accounting PronouncementsIn August 2018, the Financial Accounting Standards Board ("FASB") issued ASU No. 2018-13, Fair Value Measurement (Topic 820), which modifies the disclosures on fair value measurements by removing the requirement to disclose the amount and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy and the policy for timing of such transfers. The ASU expands the disclosure requirements for Level 3 fair value measurements, primarily focused on changes in unrealized gains and losses included in other comprehensive income. The ASU is effective for public entities for fiscal years beginning after December 15, 2019, with early adoption permitted. The Company has not yet completed its assessment of the impact of the new standard on the Company’s consolidated financial statements.

In August 2018, the FASB issued authoritative guidance under ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract. The ASU requires implementation costs incurred by customers in cloud computing arrangements (i.e., hosting arrangements) to be capitalized under the same premises of authoritative guidance for internal-use software, and deferred over the noncancelable term of the cloud computing arrangements plus any option renewal periods that are reasonably certain to be exercised by the customer or for which the exercise is controlled by the service provider. The ASU is effective for public entities for fiscal years beginning after December 15, 2019. The Company has not yet completed its assessment of the impact of the new standard on the Company’s consolidated financial statements.

In June 2016, the FASB issued authoritative guidance under ASU 2016-13, Financial Instruments—Credit Losses (Topic 326), which modifies the measurement of credit losses on financial instruments. This guidance requires the use of an expected loss impairment model for instruments measured at amortized cost based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount. For available-for-sale debt securities, an entity is required to recognize credit losses through an allowance for credit losses rather than as an impairment. The ASU is effective for interim and annual reporting periods beginning after December 15, 2019, and early adoption is permitted. The adoption of this guidance requires a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The Company has not yet completed its assessment of the impact of the new standard on the Company’s consolidated financial statements.

Note 2: Segment Reporting and Revenue

In its operation of the business, the Company's management, including its chief operating decision maker, who is also the Chief Executive Officer, evaluates the performance of the Company’s operating segments based on revenue and gross profit. The Company does not analyze discrete segment balance sheet information related to long-term assets, all of which are located in the United States. All other financial information is presented on a consolidated basis. The Company has five operating segments and two reportable segments, real estate services and properties.

Revenue is primarily generated from commissions and fees charged on each real estate services transaction completed by the Company or its partner agents, and proceeds from the sales of homes. The Company’s key revenue components are brokerage revenue, partner revenue, properties revenue, and other revenue. Revenue earned but not received is recorded as accrued revenue on the Company's consolidated balance sheets, net of an allowance for doubtful accounts. Accrued revenue, consisting of commission revenue, is known and is clearing escrow, and therefore it is not estimated.

Information on each of the reportable and other segments and reconciliation to consolidated net loss is as follows:

9


 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Real estate services
 
 
 
 
 
 
 
Brokerage revenue
$
145,399

 
$
123,355

 
$
226,713

 
$
193,498

Partner revenue
7,447

 
7,503

 
12,023

 
12,285

Total real estate services revenue
152,846

 
130,858

 
238,736

 
205,783

Cost of revenue
103,616

 
85,337

 
184,399

 
153,501

Gross profit
49,230

 
45,521

 
54,337

 
52,282

Properties
 
 
 
 
 
 
 
Revenue
39,908

 
8,986

 
61,281

 
12,038

Cost of revenue
40,906

 
9,088

 
63,898

 
12,430

Gross profit
(998
)
 
(102
)
 
(2,617
)
 
(392
)
Other
 
 
 
 
 
 
 
Revenue
5,281

 
2,798

 
8,329

 
4,715

Cost of revenue
5,167

 
3,004

 
8,948

 
5,695

Gross profit
114

 
(206
)
 
(619
)
 
(980
)
Intercompany eliminations
 
 
 
 
 
 
 
Revenue
(255
)
 

 
(424
)
 

Cost of revenue
(255
)
 

 
(424
)
 

Gross profit

 

 

 

Consolidated
 
 
 
 
 
 
 
Revenue
197,780

 
142,642

 
307,922

 
222,536

Cost of revenue
149,434

 
97,429

 
256,821

 
171,626

Gross profit
48,346

 
45,213

 
51,101

 
50,910

Operating expenses
60,767

 
42,756

 
130,972

 
85,628

      Interest income
1,913

 
729

 
4,229

 
1,307

      Interest expense
(2,153
)
 

 
(4,290
)
 

      Other income, net
36

 
21

 
128

 
179

Net income (loss)
$
(12,625
)
 
$
3,207

 
$
(79,804
)
 
$
(33,232
)


The following table presents the detail of accrued revenue for the periods presented:

 
Six Months Ended June 30,
 
2019
 
2018
Accrued revenue
$
38,902

 
$
19,036

Less: Allowance for doubtful accounts
(216
)
 
(134
)
Accrued revenue, net
$
38,686

 
$
18,902


The following table presents the activity in the allowance for doubtful accounts for the period presented:
 
Six Months Ended June 30,
 
2019
 
2018
Balance, beginning of period
$
166

 
$
160

Charges
70

 
(2
)
Write-offs
(20
)
 
(24
)
Balance, end of period
$
216

 
$
134



Note 3: Fair Value of Financial Instruments

A summary of assets and liabilities at June 30, 2019 and December 31, 2018, related to the Company's financial instruments measured at fair value on a recurring basis, is set forth below, along with the balance sheet accounts they are classified within:

10


 
Balance at June 30, 2019
 
Quoted Prices in Active Markets for Identical Assets
 (Level 1)
 
Significant
Other Observable Inputs
(Level 2)
 
Significant Unobservable Inputs
(Level 3)
Assets
 
 
 
 
 
 
 
Cash equivalents
 
 
 
 
 
 
 
        Money market funds
$
195,996

 
$
195,996

 
$

 
$

   U.S. treasury securities
29,940

 

 
29,940

 

Short-term investments
 
 
 
 
 
 
 
   U.S. treasury securities
35,365

 

 
35,365

 

Loans held for sale
30,169

 

 
30,169

 

Prepaid expenses and other current assets
 
 
 
 
 
 
 
Forward sales commitments
25

 

 
25

 

Interest rate lock commitments
712

 

 

 
712

Total prepaid expenses and other current assets
737

 


25

 
712

Long-term investments
 
 
 
 
 
 
 
   U.S. treasury securities
34,954

 

 
34,954

 

Total assets
$
327,161

 
$
195,996

 
$
130,453

 
$
712

Liabilities
 
 
 
 
 
 
 
Accrued liabilities
 
 
 
 
 
 
 
Forward sales commitments
$
407

 
$

 
$
407

 
$

Interest rate lock commitments
24

 

 

 
24

Total liabilities
$
431

 
$

 
$
407

 
$
24


 
Balance at December 31, 2018
 
Quoted Prices in Active Markets for Identical Assets
 (Level 1)
 
Significant
Other Observable Inputs
(Level 2)
 
Significant Unobservable Inputs
(Level 3)
Assets
 
 
 
 
 
 
 
Cash equivalents

 
 
 

 

Money market funds
$
425,776

 
$
425,776

 
$

 
$

Loans held for sale
4,913

 

 
4,913

 

Prepaid expenses and other current assets

 
 
 
 
 
 
Interest rate lock commitments
254

 

 

 
254

Total prepaid expenses and other current assets
254

 



 
254

Total assets
$
430,943

 
$
425,776

 
$
4,913

 
$
254

Liabilities
 
 
 
 
 
 
 
Accrued liabilities
 
 
 
 
 
 
 
Forward sales commitments
$
141

 
$

 
$
141

 
$

Total liabilities
$
141

 
$

 
$
141

 
$


There were no material transfers between levels, and there was no significant activity within Level 3 financial instruments during the periods presented.

See Note 14: Debt for the carrying amount and estimated fair value of the Company's 1.75% Convertible Senior Notes due 2023 (the "Notes").

Assets and liabilities recognized or disclosed at fair value on a nonrecurring basis include items such as property, plant and equipment, goodwill and other intangible assets, cost method investments, and other assets. These assets are measured at fair value if determined to be impaired. The Company did not record any significant nonrecurring fair value measurements after initial recognition for the period ended June 30, 2019.

11



Gross unrealized holding gains and losses on available-for-sale debt securities were not material as of June 30, 2019.

Note 4: Inventory

 
June 30, 2019
 
December 31, 2018
Properties for sale
$
52,118

 
$
12,649

Properties not available for sale
9,370

 
2,328

Properties under improvement
24,166

 
7,717

Inventory
$
85,654

 
$
22,694


Inventory costs include direct property acquisition costs and any capitalized improvements, net of applicable lower of cost or net realizable value write-downs. As of June 30, 2019 and December 31, 2018, lower of cost or net realizable value write-downs were $179 and $190, respectively.
Properties not available for sale represent purchased properties that have been temporarily rented back to the previous homeowner, typically for less than 30 days. Both properties not available for sale and properties under improvement are expected to be sold in less than twelve months.

Note 5: Property and Equipment

A summary of property and equipment at June 30, 2019 and December 31, 2018 is as follows:
 
Useful Lives (Years)
 
June 30, 2019
 
December 31, 2018
Leasehold improvements
Shorter of lease term or economic life
 
$
25,568

 
$
19,285

Website and software development costs
2-3
 
23,220

 
19,948

Computer and office equipment
3
 
4,423

 
2,956

Software
3
 
595

 
595

Furniture
7
 
6,446

 
3,933

Property and equipment, gross
 
 
60,252

 
46,717

Accumulated depreciation and amortization
 
 
(24,577
)
 
(21,530
)
Property and equipment, net
 
 
$
35,675

 
$
25,187



Depreciation and amortization expense for property and equipment amounted to $2,049 and $1,777 for the three months ended June 30, 2019 and 2018, respectively, and $3,565 and $3,658 for the six months ended June 30, 2019 and 2018, respectively.

Note 6: Leases

The extent of the Company’s lease commitments consists of operating leases for physical office locations with terms ranging from one to 11 years. The Company has accounted for the portfolio of operating leases by disaggregation based on nature and term of the lease. Generally, the leases require a fixed minimum rent with contractual minimum rent increases over the lease term. Leases with an initial term of 12 months or less are not recorded on the balance sheet, but rather lease expense from these leases is recognized on a straight-line basis over the lease term.

When available, the rate implicit in the lease to discount lease payments to present value would be used; however, none of the Company's significant leases as of June 30, 2019 provide a readily determinable implicit rate. Therefore, the Company must estimate its incremental borrowing rate for each portfolio of leases to discount the lease payments based on information available at lease commencement.

The Company has evaluated the performance of existing leases in relation to its leasing strategy and determined that most renewal options would not be reasonably certain to be exercised.


12


The right of use asset and related lease liability is determined based on the lease component of the consideration in each lease contract. The Company has evaluated its lease portfolio for appropriate allocation of the consideration in the lease contracts between lease and nonlease components based on standalone prices and determined the allocation per the contracts to be appropriate.

Lease Cost
 
Classification
 
Three Months Ended June 30, 2019
 
Six Months Ended June 30, 2019
Operating lease cost (a)
 
Cost of revenue
 
$
2,091

 
$
3,785

Operating lease cost (a)
 
Operating expenses
 
855

 
1,710

Total lease cost