rdfn-20200630

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, 2020


☐			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

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

☐

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

☐

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

☒

The registrant had 99,476,640 shares of common stock outstanding as of July 23, 2020.

Redfin Corporation

Quarterly Report on Form 10-Q

For the Quarter Ended June 30, 2020

Table of Contents



PART I		Page
Item 1.	Financial Statements (unaudited)	1
	Consolidated Balance Sheets	1
	Consolidated Statements of Comprehensive Loss	2
	Consolidated Statements of Cash Flows	3
	Consolidated Statements of Changes in Mezzanine Equity and Stockholders’ Equity	4
	Index to Notes to Consolidated Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40
Item 4.	Controls and Procedures	40

PART II
Item 1.	Legal Proceedings	42
Item 1A.	Risk Factors	42
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	49
Item 6.	Exhibits	49

	Signatures

As used in this quarterly report, the terms "Redfin," "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 COVID-19's anticipated impacts on our business, 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,” "hope," “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, 2019, as supplemented by Part II, Item 1A of this 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

Consolidated Balance Sheets

(in thousands, except share and per share amounts, unaudited)


	June 30, 2020		December 31, 2019
Assets
Current assets
Cash and cash equivalents	$	325,352	$	234,679
Restricted cash	35,102		12,769
Short-term investments	128,056		70,029
Accounts receivable, net	34,182		19,223
Inventory	9,437		74,590
Loans held for sale	42,439		21,985
Prepaid expenses	7,624		14,822
Other current assets	4,555		3,496
Total current assets	586,747		451,593
Property and equipment, net	41,414		39,577
Right-of-use assets, net	47,697		52,004
Long-term investments	18,792		30,978
Goodwill and intangibles, net	11,260		11,504
Other non-current assets	9,430		10,557
Total assets	$	715,340	$	596,213
Liabilities, mezzanine equity and stockholders' equity
Current liabilities
Accounts payable	$	3,389	$	2,122
Accrued liabilities	48,967		38,022
Other payables	27,614		7,884
Warehouse credit facilities	40,566		21,302
Secured revolving credit facility	7,215		4,444
Current lease liabilities	11,614		11,408
Total current liabilities	139,365		85,182
Non-current lease liabilities	54,362		59,869
Convertible senior notes, net	122,884		119,716
Non-current payroll tax liabilities	3,668		—
Total liabilities	320,279		264,767
Commitments and contingencies (Note 7)
Series A convertible preferred stock—par value $0.001 per share; 10,000,000 shares authorized; 40,000 and no shares issued and outstanding, respectively	39,801		—
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, respectively	99		93
Additional paid-in capital	673,234		583,097
Accumulated other comprehensive income	441		42
Accumulated deficit	(318,514)		(251,786)
Total stockholders’ equity	355,260		331,446
Total liabilities, mezzanine equity and stockholders’ equity	$	715,340	$	596,213

See Notes to the consolidated financial statements.

Table of Contents

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, 2020
	2020		2019		2020		2019
Revenue
Service	$	141,135	$	157,872	$	252,613	$	246,641
Product	72,530		39,908		152,047		61,281
Total revenue	213,665		197,780		404,660		307,922
Cost of revenue
Service	93,891		108,528		192,259		192,923
Product	73,735		40,906		153,483		63,898
Total cost of revenue	167,626		149,434		345,742		256,821
Gross profit	46,039		48,346		58,918		51,101
Operating expenses
Technology and development	17,961		16,063		38,235		31,620
Marketing	9,482		27,050		35,190		60,250
General and administrative⁽¹⁾	23,022		17,654		47,349		39,102
Total operating expenses	50,465		60,767		120,774		130,972
Loss from operations	(4,426)		(12,421)		(61,856)		(79,871)
Interest income	437		1,913		1,540		4,229
Interest expense	(2,665)		(2,153)		(5,109)		(4,290)
Other income (expense), net	43		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 diluted	98,785,318		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	3		37		(22)		38
Unrealized gain (loss) on available-for-sale securities	(137)		6		421		6
Total comprehensive loss	$	(6,745)	$	(12,582)	$	(66,329)	$	(79,760)

(1) 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.

See Notes to the consolidated financial statements.

Table of Contents

Redfin Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(in thousands, unaudited)


	Six Months Ended June 30,
	2020		2019
Operating Activities
Net loss	$	(66,728)	$	(79,804)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	6,865		3,809
Stock-based compensation	14,416		12,282
Amortization of debt discount and issuance costs	3,477		3,031
Non-cash lease expense	4,522		2,943
Impairment costs	1,420		—
Other	(1,190)		(100)
Change in assets and liabilities:
Accounts receivable, net	(14,959)		(23,323)
Inventory	65,153		(62,960)
Prepaid expenses and other assets	5,446		1,230
Accounts payable	1,040		1,350
Accrued liabilities, other payables, and non-current payroll tax liabilities	14,244		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 sale	274,595		128,080
Net cash provided by (used in) operating activities	8,744		(143,609)
Investing activities
Purchases of property and equipment	(6,072)		(9,504)
Purchases of investments	(88,724)		(70,312)
Sales of investments	3,183		100
Maturities of investments	40,351		—
Net cash used in investing activities	(51,262)		(79,716)
Financing activities
Proceeds from the issuance of convertible preferred stock, net of issuance costs	39,801		—
Proceeds from the issuance of common stock, net of issuance costs	69,701		—
Proceeds from the issuance of shares resulting from employee equity plans	11,052		8,965
Tax payments related to net share settlements on restricted stock units	(6,065)		(1,792)
Borrowings from warehouse credit facilities	290,891		149,900
Repayments to warehouse credit facilities	(271,627)		(125,206)
Borrowings from secured revolving credit facility	39,587		—
Repayments to secured revolving credit facility	(36,816)		—
Other payables—deposits held in escrow	19,056		11,602
Principal payments for finance lease obligations	(30)		—

Cash paid for debt issuance costs	(4)		—
Net cash provided by financing activities	155,546		43,469
Effect of exchange rate changes on cash and cash equivalents	(22)		38
Net change in cash, cash equivalents, and restricted cash	113,006		(179,818)
Cash, cash equivalents, and restricted cash:
Beginning of period	247,448		439,055
End of period	$	360,454	$	259,237
Supplemental disclosure of cash flow information
Cash paid for interest	2,133		1,202
Non-cash transactions
Stock-based compensation capitalized in property and equipment	1,151		561
Property and equipment additions in accounts payable and accrued liabilities	1,492		620
Leasehold improvements paid directly by lessor	—		3,444

See Notes to the consolidated financial statements.

Table of Contents

Redfin Corporation and Subsidiaries

Consolidated Statements of Changes in Mezzanine Equity and Stockholders’ Equity

(in thousands, except share amounts, unaudited)


	Series A Convertible Preferred Stock				Common Stock						Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income	Total Stockholders' Equity
	Shares	Amount		Shares	Amount
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

Balance, March 31, 2020	—	$	—	93,957,774	$	94	$	591,420	$	(311,903)	$	575	$	280,186
Issuance of convertible preferred stock, net	40,000	39,801		—	—		—		—		—		—

Issuance of common stock, net	—	—		4,484,305	4		69,697		—		—		69,701
Issuance of common stock pursuant to employee stock purchase program	—	—		186,925	—		3,436		—		—		3,436
Issuance of common stock pursuant to exercise of stock options	—	—		519,432	1		3,588		—		—		3,589
Issuance of common stock pursuant to settlement of restricted stock units	—	—		344,075	—		—		—		—		—
Common stock surrendered for employees' tax liability upon settlement of restricted stock units	—	—		(98,079)	—		(2,758)		—		—		(2,758)
Stock-based compensation	—	—		—	—		7,851		—		—		7,851
Other comprehensive loss	—	—		—	—		—		—		(134)		(134)
Net loss	—	—		—	—		—		(6,611)		—		(6,611)
Balance, June 30, 2020	40,000	$	39,801	99,394,432	$	99	$	673,234	$	(318,514)	$	441	$	355,260

Table of Contents


	Series A Convertible Preferred Stock				Common Stock						Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income	Total Stockholders' Equity
	Shares	Amount		Shares	Amount
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

Balance, December 31, 2019	—	$	—	93,001,597	$	93	$	583,097	$	(251,786)	$	42	$	331,446
Issuance of convertible preferred stock, net	40,000	39,801		—	—		—		—		—		—

Issuance of common stock, net	—	—		4,484,305	4		69,697		—		—		69,701
Issuance of common stock pursuant to employee stock purchase program	—	—		186,925	—		3,436		—		—		3,436
Issuance of common stock pursuant to exercise of stock options	—	—		1,257,830	1		7,503		—		—		7,504
Issuance of common stock pursuant to settlement of restricted stock units	—	—		664,515	1		(1)		—		—		—
Common stock surrendered for employees' tax liability upon settlement of restricted stock units	—	—		(200,740)	—		(6,065)		—		—		(6,065)
Stock-based compensation	—	—		—	—		15,567		—		—		15,567
Other comprehensive income	—	—		—	—		—		—