0001382821--12-312020Q3false0.0010.0010.001500,000,000500,000,000500,000,000100,241,41693,001,597100,241,41693,001,5970.0010.0010.00110,000,00010,000,00010,000,00040,000—40,000—23P1Y488488488488—1,95200013828212020-01-012020-09-30xbrli:shares00013828212020-10-29iso4217:USD00013828212020-09-3000013828212019-12-310001382821us-gaap:FairValueMeasurementsRecurringMember2020-09-30iso4217:USDxbrli:shares0001382821us-gaap:ServiceMember2020-07-012020-09-300001382821us-gaap:ServiceMember2019-07-012019-09-300001382821us-gaap:ServiceMember2020-01-012020-09-300001382821us-gaap:ServiceMember2019-01-012019-09-300001382821us-gaap:ProductMember2020-07-012020-09-300001382821us-gaap:ProductMember2019-07-012019-09-300001382821us-gaap:ProductMember2020-01-012020-09-300001382821us-gaap:ProductMember2019-01-012019-09-3000013828212020-07-012020-09-3000013828212019-07-012019-09-3000013828212019-01-012019-09-300001382821rdfn:COVID19Member2020-07-012020-09-300001382821rdfn:COVID19Member2020-01-012020-09-3000013828212018-12-3100013828212019-09-300001382821us-gaap:CommonStockMember2019-06-300001382821us-gaap:AdditionalPaidInCapitalMember2019-06-300001382821us-gaap:RetainedEarningsMember2019-06-300001382821us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-06-3000013828212019-06-300001382821us-gaap:CommonStockMember2019-07-012019-09-300001382821us-gaap:AdditionalPaidInCapitalMember2019-07-012019-09-300001382821us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-07-012019-09-300001382821us-gaap:RetainedEarningsMember2019-07-012019-09-300001382821us-gaap:CommonStockMember2019-09-300001382821us-gaap:AdditionalPaidInCapitalMember2019-09-300001382821us-gaap:RetainedEarningsMember2019-09-300001382821us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-09-3000013828212020-06-300001382821us-gaap:CommonStockMember2020-06-300001382821us-gaap:AdditionalPaidInCapitalMember2020-06-300001382821us-gaap:RetainedEarningsMember2020-06-300001382821us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-06-300001382821us-gaap:CommonStockMember2020-07-012020-09-300001382821us-gaap:AdditionalPaidInCapitalMember2020-07-012020-09-300001382821us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-07-012020-09-300001382821us-gaap:RetainedEarningsMember2020-07-012020-09-300001382821us-gaap:CommonStockMember2020-09-300001382821us-gaap:AdditionalPaidInCapitalMember2020-09-300001382821us-gaap:RetainedEarningsMember2020-09-300001382821us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-09-300001382821us-gaap:CommonStockMember2018-12-310001382821us-gaap:AdditionalPaidInCapitalMember2018-12-310001382821us-gaap:RetainedEarningsMember2018-12-310001382821us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-12-310001382821us-gaap:CommonStockMember2019-01-012019-09-300001382821us-gaap:AdditionalPaidInCapitalMember2019-01-012019-09-300001382821us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-01-012019-09-300001382821us-gaap:RetainedEarningsMember2019-01-012019-09-300001382821us-gaap:CommonStockMember2019-12-310001382821us-gaap:AdditionalPaidInCapitalMember2019-12-310001382821us-gaap:RetainedEarningsMember2019-12-310001382821us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-12-310001382821us-gaap:CommonStockMember2020-01-012020-09-300001382821us-gaap:AdditionalPaidInCapitalMember2020-01-012020-09-300001382821us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-01-012020-09-300001382821us-gaap:RetainedEarningsMember2020-01-012020-09-30rdfn:investment_typerdfn:segment0001382821us-gaap:OperatingSegmentsMemberrdfn:RealEstateSegmentMemberrdfn:BrokerageRevenueMember2020-07-012020-09-300001382821us-gaap:OperatingSegmentsMemberrdfn:RealEstateSegmentMemberrdfn:BrokerageRevenueMember2019-07-012019-09-300001382821us-gaap:OperatingSegmentsMemberrdfn:RealEstateSegmentMemberrdfn:BrokerageRevenueMember2020-01-012020-09-300001382821us-gaap:OperatingSegmentsMemberrdfn:RealEstateSegmentMemberrdfn:BrokerageRevenueMember2019-01-012019-09-300001382821us-gaap:OperatingSegmentsMemberrdfn:RealEstateSegmentMemberrdfn:PartnerRevenueMember2020-07-012020-09-300001382821us-gaap:OperatingSegmentsMemberrdfn:RealEstateSegmentMemberrdfn:PartnerRevenueMember2019-07-012019-09-300001382821us-gaap:OperatingSegmentsMemberrdfn:RealEstateSegmentMemberrdfn:PartnerRevenueMember2020-01-012020-09-300001382821us-gaap:OperatingSegmentsMemberrdfn:RealEstateSegmentMemberrdfn:PartnerRevenueMember2019-01-012019-09-300001382821us-gaap:OperatingSegmentsMemberrdfn:RealEstateSegmentMember2020-07-012020-09-300001382821us-gaap:OperatingSegmentsMemberrdfn:RealEstateSegmentMember2019-07-012019-09-300001382821us-gaap:OperatingSegmentsMemberrdfn:RealEstateSegmentMember2020-01-012020-09-300001382821us-gaap:OperatingSegmentsMemberrdfn:RealEstateSegmentMember2019-01-012019-09-300001382821us-gaap:OperatingSegmentsMemberrdfn:PropertiesSegmentMember2020-07-012020-09-300001382821us-gaap:OperatingSegmentsMemberrdfn:PropertiesSegmentMember2019-07-012019-09-300001382821us-gaap:OperatingSegmentsMemberrdfn:PropertiesSegmentMember2020-01-012020-09-300001382821us-gaap:OperatingSegmentsMemberrdfn:PropertiesSegmentMember2019-01-012019-09-300001382821us-gaap:CorporateNonSegmentMember2020-07-012020-09-300001382821us-gaap:CorporateNonSegmentMember2019-07-012019-09-300001382821us-gaap:CorporateNonSegmentMember2020-01-012020-09-300001382821us-gaap:CorporateNonSegmentMember2019-01-012019-09-300001382821us-gaap:IntersegmentEliminationMember2020-07-012020-09-300001382821us-gaap:IntersegmentEliminationMember2019-07-012019-09-300001382821us-gaap:IntersegmentEliminationMember2020-01-012020-09-300001382821us-gaap:IntersegmentEliminationMember2019-01-012019-09-300001382821us-gaap:InterestRateLockCommitmentsMember2020-09-300001382821us-gaap:InterestRateLockCommitmentsMember2019-09-300001382821us-gaap:ForwardContractsMember2020-09-300001382821us-gaap:ForwardContractsMember2019-09-300001382821us-gaap:InterestRateLockCommitmentsMemberrdfn:ServiceRevenueMember2020-07-012020-09-300001382821us-gaap:InterestRateLockCommitmentsMemberrdfn:ServiceRevenueMember2019-07-012019-09-300001382821us-gaap:InterestRateLockCommitmentsMemberrdfn:ServiceRevenueMember2020-01-012020-09-300001382821us-gaap:InterestRateLockCommitmentsMemberrdfn:ServiceRevenueMember2019-01-012019-09-300001382821rdfn:ServiceRevenueMemberus-gaap:ForwardContractsMember2020-07-012020-09-300001382821rdfn:ServiceRevenueMemberus-gaap:ForwardContractsMember2019-07-012019-09-300001382821rdfn:ServiceRevenueMemberus-gaap:ForwardContractsMember2020-01-012020-09-300001382821rdfn:ServiceRevenueMemberus-gaap:ForwardContractsMember2019-01-012019-09-300001382821us-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMember2020-09-300001382821us-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel1Member2020-09-300001382821us-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel2Member2020-09-300001382821us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Memberus-gaap:MoneyMarketFundsMember2020-09-300001382821us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasurySecuritiesMember2020-09-300001382821us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasurySecuritiesMemberus-gaap:FairValueInputsLevel1Member2020-09-300001382821us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:USTreasurySecuritiesMember2020-09-300001382821us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Memberus-gaap:USTreasurySecuritiesMember2020-09-300001382821us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2020-09-300001382821us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2020-09-300001382821us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2020-09-300001382821us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasurySecuritiesMember2020-09-300001382821us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasurySecuritiesMemberus-gaap:FairValueInputsLevel1Member2020-09-300001382821us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:USTreasurySecuritiesMember2020-09-300001382821us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Memberus-gaap:USTreasurySecuritiesMember2020-09-300001382821us-gaap:InterestRateLockCommitmentsMemberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001382821us-gaap:InterestRateLockCommitmentsMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2020-09-300001382821us-gaap:InterestRateLockCommitmentsMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2020-09-300001382821us-gaap:InterestRateLockCommitmentsMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2020-09-300001382821us-gaap:FairValueMeasurementsRecurringMemberus-gaap:ForwardContractsMember2020-09-300001382821us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Memberus-gaap:ForwardContractsMember2020-09-300001382821us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:ForwardContractsMember2020-09-300001382821us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Memberus-gaap:ForwardContractsMember2020-09-300001382821us-gaap:FairValueMeasurementsRecurringMemberrdfn:AgencyBondsMember2020-09-300001382821us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Memberrdfn:AgencyBondsMember2020-09-300001382821us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberrdfn:AgencyBondsMember2020-09-300001382821us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Memberrdfn:AgencyBondsMember2020-09-300001382821us-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMember2019-12-310001382821us-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel1Member2019-12-310001382821us-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel2Member2019-12-310001382821us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Memberus-gaap:MoneyMarketFundsMember2019-12-310001382821us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasurySecuritiesMember2019-12-310001382821us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasurySecuritiesMemberus-gaap:FairValueInputsLevel1Member2019-12-310001382821us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:USTreasurySecuritiesMember2019-12-310001382821us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Memberus-gaap:USTreasurySecuritiesMember2019-12-310001382821us-gaap:FairValueMeasurementsRecurringMember2019-12-310001382821us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2019-12-310001382821us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2019-12-310001382821us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2019-12-310001382821us-gaap:InterestRateLockCommitmentsMemberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001382821us-gaap:InterestRateLockCommitmentsMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2019-12-310001382821us-gaap:InterestRateLockCommitmentsMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2019-12-310001382821us-gaap:InterestRateLockCommitmentsMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2019-12-310001382821us-gaap:FairValueMeasurementsRecurringMemberus-gaap:ForwardContractsMember2019-12-310001382821us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Memberus-gaap:ForwardContractsMember2019-12-310001382821us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:ForwardContractsMember2019-12-310001382821us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Memberus-gaap:ForwardContractsMember2019-12-31xbrli:pure0001382821rdfn:MarketingpricingMemberus-gaap:InterestRateLockCommitmentsMemberrdfn:MeasurementInputWeightedAveragePullThroughRatMember2020-09-300001382821rdfn:MarketingpricingMemberus-gaap:InterestRateLockCommitmentsMemberrdfn:MeasurementInputWeightedAveragePullThroughRatMember2019-12-310001382821us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CashMember2020-09-300001382821us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CashMember2019-12-310001382821us-gaap:LeaseholdImprovementsMember2020-09-300001382821us-gaap:LeaseholdImprovementsMember2019-12-310001382821us-gaap:SoftwareDevelopmentMember2020-09-300001382821us-gaap:SoftwareDevelopmentMember2019-12-310001382821us-gaap:OfficeEquipmentMember2020-01-012020-09-300001382821us-gaap:OfficeEquipmentMember2020-09-300001382821us-gaap:OfficeEquipmentMember2019-12-310001382821rdfn:SoftwareMember2020-01-012020-09-300001382821rdfn:SoftwareMember2020-09-300001382821rdfn:SoftwareMember2019-12-310001382821us-gaap:FurnitureAndFixturesMember2020-01-012020-09-300001382821us-gaap:FurnitureAndFixturesMember2020-09-300001382821us-gaap:FurnitureAndFixturesMember2019-12-310001382821us-gaap:ConstructionInProgressMember2020-09-300001382821us-gaap:ConstructionInProgressMember2019-12-310001382821us-gaap:SoftwareDevelopmentMembersrt:MinimumMember2020-01-012020-09-300001382821us-gaap:SoftwareDevelopmentMembersrt:MaximumMember2020-01-012020-09-300001382821us-gaap:CostOfSalesMember2020-07-012020-09-300001382821us-gaap:CostOfSalesMember2019-07-012019-09-300001382821us-gaap:CostOfSalesMember2020-01-012020-09-300001382821us-gaap:CostOfSalesMember2019-01-012019-09-300001382821us-gaap:OperatingExpenseMember2020-07-012020-09-300001382821us-gaap:OperatingExpenseMember2019-07-012019-09-300001382821us-gaap:OperatingExpenseMember2020-01-012020-09-300001382821us-gaap:OperatingExpenseMember2019-01-012019-09-30rdfn:complaint00013828212020-05-112020-05-110001382821rdfn:MrErakerVRedfinAndMadronaVentureGroupLLCMember2020-05-112020-05-110001382821srt:MinimumMember2020-09-300001382821srt:MaximumMember2020-09-300001382821us-gaap:VehiclesMember2020-09-300001382821us-gaap:TradeNamesMember2020-01-012020-09-300001382821us-gaap:TradeNamesMember2020-09-300001382821us-gaap:TradeNamesMember2019-12-310001382821us-gaap:DevelopedTechnologyRightsMember2020-01-012020-09-300001382821us-gaap:DevelopedTechnologyRightsMember2020-09-300001382821us-gaap:DevelopedTechnologyRightsMember2019-12-310001382821us-gaap:CustomerRelationshipsMember2020-01-012020-09-300001382821us-gaap:CustomerRelationshipsMember2020-09-300001382821us-gaap:CustomerRelationshipsMember2019-12-310001382821us-gaap:CommonStockMember2020-04-012020-04-010001382821us-gaap:CommonStockMember2020-04-010001382821us-gaap:PreferredStockMember2020-04-012020-04-010001382821us-gaap:PreferredStockMember2020-04-0100013828212020-04-012020-04-0100013828212020-04-01rdfn:numberOfTradingDays0001382821rdfn:A2004EquityIncentivePlanMemberus-gaap:EmployeeStockMember2020-09-300001382821rdfn:A2004EquityIncentivePlanMember2020-01-012020-09-300001382821rdfn:A2017EquityIncentivePlanMember2017-07-260001382821rdfn:A2017EquityIncentivePlanMember2020-01-012020-06-300001382821rdfn:A2017EquityIncentivePlanMembersrt:MinimumMember2020-01-012020-09-300001382821rdfn:A2017EquityIncentivePlanMembersrt:MaximumMember2020-01-012020-09-300001382821rdfn:A2017EquityIncentivePlanMember2020-09-300001382821rdfn:A2017EquityIncentivePlanMember2019-12-310001382821us-gaap:EmployeeStockMemberrdfn:A2017EmployeeStockPurchasePlanMember2017-07-270001382821us-gaap:EmployeeStockMemberrdfn:A2017EmployeeStockPurchasePlanMember2017-07-272017-07-270001382821us-gaap:EmployeeStockMemberrdfn:A2017EmployeeStockPurchasePlanMember2020-01-012020-09-300001382821rdfn:A2017EmployeeStockPurchasePlanMember2020-09-300001382821rdfn:A2017EmployeeStockPurchasePlanMember2019-12-3100013828212020-01-012020-03-310001382821us-gaap:EmployeeStockOptionMember2020-01-012020-09-300001382821us-gaap:PerformanceSharesMembersrt:ChiefExecutiveOfficerMember2019-06-012019-06-010001382821us-gaap:PerformanceSharesMembersrt:MaximumMembersrt:ChiefExecutiveOfficerMember2019-06-012019-06-010001382821us-gaap:RestrictedStockUnitsRSUMember2019-12-310001382821us-gaap:RestrictedStockUnitsRSUMember2020-01-012020-09-300001382821us-gaap:RestrictedStockUnitsRSUMember2020-09-300001382821us-gaap:PerformanceSharesMember2020-09-300001382821rdfn:PerformanceRestrictedStockUnitsMember2020-01-012020-09-300001382821us-gaap:PerformanceSharesMembersrt:MinimumMember2020-01-012020-09-300001382821us-gaap:PerformanceSharesMembersrt:MaximumMember2020-01-012020-09-300001382821us-gaap:PerformanceSharesMemberrdfn:JanuaryToDecember2019AwardsMember2020-01-012020-09-300001382821us-gaap:PerformanceSharesMember2019-01-012019-09-300001382821us-gaap:PerformanceSharesMemberrdfn:JanuaryToDecember2018AwardsMember2019-01-012019-09-300001382821us-gaap:PerformanceSharesMemberrdfn:JanuaryToDecember2019AwardsMember2019-01-012019-09-300001382821us-gaap:ResearchAndDevelopmentExpenseMember2020-07-012020-09-300001382821us-gaap:ResearchAndDevelopmentExpenseMember2019-07-012019-09-300001382821us-gaap:ResearchAndDevelopmentExpenseMember2020-01-012020-09-300001382821us-gaap:ResearchAndDevelopmentExpenseMember2019-01-012019-09-300001382821us-gaap:SellingAndMarketingExpenseMember2020-07-012020-09-300001382821us-gaap:SellingAndMarketingExpenseMember2019-07-012019-09-300001382821us-gaap:SellingAndMarketingExpenseMember2020-01-012020-09-300001382821us-gaap:SellingAndMarketingExpenseMember2019-01-012019-09-300001382821us-gaap:GeneralAndAdministrativeExpenseMember2020-07-012020-09-300001382821us-gaap:GeneralAndAdministrativeExpenseMember2019-07-012019-09-300001382821us-gaap:GeneralAndAdministrativeExpenseMember2020-01-012020-09-300001382821us-gaap:GeneralAndAdministrativeExpenseMember2019-01-012019-09-300001382821us-gaap:ConvertibleDebtMember2020-07-012020-09-300001382821us-gaap:ConvertibleDebtMember2019-07-012019-09-300001382821us-gaap:ConvertibleDebtMember2020-01-012020-09-300001382821us-gaap:ConvertibleDebtMember2019-01-012019-09-300001382821us-gaap:ConvertiblePreferredStockMember2020-07-012020-09-300001382821us-gaap:ConvertiblePreferredStockMember2019-07-012019-09-300001382821us-gaap:ConvertiblePreferredStockMember2020-01-012020-09-300001382821us-gaap:ConvertiblePreferredStockMember2019-01-012019-09-300001382821us-gaap:EmployeeStockOptionMember2020-07-012020-09-300001382821us-gaap:EmployeeStockOptionMember2019-07-012019-09-300001382821us-gaap:EmployeeStockOptionMember2020-01-012020-09-300001382821us-gaap:EmployeeStockOptionMember2019-01-012019-09-300001382821us-gaap:RestrictedStockUnitsRSUMember2020-07-012020-09-300001382821us-gaap:RestrictedStockUnitsRSUMember2019-07-012019-09-300001382821us-gaap:RestrictedStockUnitsRSUMember2020-01-012020-09-300001382821us-gaap:RestrictedStockUnitsRSUMember2019-01-012019-09-300001382821us-gaap:EmployeeStockMember2020-07-012020-09-300001382821us-gaap:EmployeeStockMember2019-07-012019-09-300001382821us-gaap:EmployeeStockMember2020-01-012020-09-300001382821us-gaap:EmployeeStockMember2019-01-012019-09-3000013828212017-09-300001382821us-gaap:DomesticCountryMember2019-12-310001382821us-gaap:StateAndLocalJurisdictionMember2019-12-310001382821rdfn:WesternAllianceBankMemberus-gaap:WarehouseAgreementBorrowingsMember2020-09-300001382821rdfn:WesternAllianceBankMemberus-gaap:WarehouseAgreementBorrowingsMember2019-12-310001382821us-gaap:WarehouseAgreementBorrowingsMemberrdfn:TexasCapitalBankNationalAssociationMember2020-09-300001382821us-gaap:WarehouseAgreementBorrowingsMemberrdfn:TexasCapitalBankNationalAssociationMember2019-12-310001382821us-gaap:WarehouseAgreementBorrowingsMemberrdfn:FlagstarBankMember2020-09-300001382821us-gaap:WarehouseAgreementBorrowingsMemberrdfn:FlagstarBankMember2019-12-310001382821us-gaap:WarehouseAgreementBorrowingsMember2020-09-300001382821us-gaap:WarehouseAgreementBorrowingsMember2019-12-310001382821rdfn:WesternAllianceBankMemberus-gaap:LondonInterbankOfferedRateLIBORMemberus-gaap:WarehouseAgreementBorrowingsMember2020-01-012020-09-300001382821rdfn:WesternAllianceBankMemberus-gaap:LondonInterbankOfferedRateLIBORMemberus-gaap:WarehouseAgreementBorrowingsMember2020-09-300001382821rdfn:WesternAllianceBankMemberus-gaap:LondonInterbankOfferedRateLIBORMemberus-gaap:WarehouseAgreementBorrowingsMember2019-12-310001382821us-gaap:WarehouseAgreementBorrowingsMemberrdfn:TexasCapitalBankNationalAssociationMember2020-01-012020-09-300001382821us-gaap:LondonInterbankOfferedRateLIBORMemberus-gaap:LineOfCreditMemberus-gaap:RevolvingCreditFacilityMemberrdfn:FlagstarWarehouseCreditFacilityMember2020-01-012020-09-300001382821us-gaap:LineOfCreditMemberus-gaap:RevolvingCreditFacilityMemberrdfn:FlagstarWarehouseCreditFacilityMember2020-09-300001382821us-gaap:LineOfCreditMemberus-gaap:RevolvingCreditFacilityMemberrdfn:FlagstarWarehouseCreditFacilityMember2019-12-310001382821us-gaap:RevolvingCreditFacilityMemberrdfn:GoldmanSachsBankUSAMember2020-09-300001382821us-gaap:RevolvingCreditFacilityMemberrdfn:GoldmanSachsBankUSAMember2019-12-310001382821us-gaap:RevolvingCreditFacilityMemberrdfn:GoldmanSachsBankUSAMember2020-01-012020-09-300001382821us-gaap:RevolvingCreditFacilityMemberrdfn:GoldmanSachsBankUSAMembersrt:MinimumMember2020-01-012020-09-300001382821us-gaap:RevolvingCreditFacilityMemberrdfn:GoldmanSachsBankUSAMembersrt:MaximumMember2020-01-012020-09-300001382821us-gaap:RevolvingCreditFacilityMember2020-09-300001382821us-gaap:RevolvingCreditFacilityMember2019-12-310001382821us-gaap:RevolvingCreditFacilityMember2020-07-012020-09-300001382821us-gaap:RevolvingCreditFacilityMember2019-07-012019-09-300001382821us-gaap:RevolvingCreditFacilityMember2020-01-012020-09-300001382821us-gaap:RevolvingCreditFacilityMember2019-01-012019-09-300001382821rdfn:A1.75ConvertibleSeniorNotesdue2023Member2018-07-230001382821rdfn:A1.75ConvertibleSeniorNotesdue2023Member2020-09-300001382821rdfn:A1.75ConvertibleSeniorNotesdue2023Member2019-12-310001382821us-gaap:FairValueInputsLevel2Memberrdfn:A1.75ConvertibleSeniorNotesdue2023Member2020-09-300001382821us-gaap:FairValueInputsLevel2Memberrdfn:A1.75ConvertibleSeniorNotesdue2023Member2019-12-310001382821rdfn:A1.75ConvertibleSeniorNotesdue2023Member2020-07-012020-09-300001382821rdfn:A1.75ConvertibleSeniorNotesdue2023Member2019-07-012019-09-300001382821rdfn:A1.75ConvertibleSeniorNotesdue2023Member2020-01-012020-09-300001382821rdfn:A1.75ConvertibleSeniorNotesdue2023Member2019-01-012019-09-300001382821us-gaap:WarehouseAgreementBorrowingsMemberrdfn:TexasCapitalBankNationalAssociationMemberus-gaap:SubsequentEventMember2020-10-052020-10-050001382821us-gaap:WarehouseAgreementBorrowingsMemberrdfn:TexasCapitalBankNationalAssociationMemberus-gaap:SubsequentEventMember2020-10-050001382821rdfn:A0ConvertibleSeniorNotesDue2025Memberus-gaap:SubsequentEventMember2020-10-200001382821rdfn:A0ConvertibleSeniorNotesDue2025Memberus-gaap:SubsequentEventMember2020-10-202020-10-200001382821rdfn:A1.75ConvertibleSeniorNotesdue2023Memberus-gaap:SubsequentEventMember2020-10-200001382821rdfn:A1.75ConvertibleSeniorNotesdue2023Memberus-gaap:SubsequentEventMember2020-10-202020-10-200001382821rdfn:WesternAllianceBankMemberus-gaap:LondonInterbankOfferedRateLIBORMemberus-gaap:WarehouseAgreementBorrowingsMemberus-gaap:SubsequentEventMember2020-10-232020-10-230001382821rdfn:WesternAllianceBankMemberus-gaap:LondonInterbankOfferedRateLIBORMemberus-gaap:WarehouseAgreementBorrowingsMemberus-gaap:SubsequentEventMember2020-10-23rdfn:plaintiff0001382821us-gaap:SubsequentEventMember2020-10-282020-10-28
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 September 30, 2020
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
(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 102,344,011 shares of common stock outstanding as of October 29, 2020.
Redfin Corporation
Quarterly Report on Form 10-Q
For the Quarter Ended September 30, 2020
Table of Contents
| | | | | | | | |
| | |
PART I | | Page |
Item 1. | | |
| | |
| | |
| | |
| | |
| | |
Item 2. | | |
Item 3. | | |
Item 4. | | |
| | |
PART II | | |
Item 1. | | |
Item 1A. | | |
Item 2. | | |
Item 6. | | |
| | |
| | |
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. However, when referencing (i) the 2023 notes and the 2025 notes, the terms “we,” “us,” and “our” refer only to Redfin Corporation and not to Redfin Corporation and its subsidiaries taken as a whole, (ii) the secured revolving credit facility with Goldman Sachs, the terms "we," "us," and "our" refer only to RedfinNow Borrower LLC, and (iii) each warehouse credit facility, the terms "we," "us"," and "our" refer only to Redfin Mortgage, LLC.
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.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Redfin Corporation and Subsidiaries
Consolidated Balance Sheets
(in thousands, except share and per share amounts, unaudited)
| | | | | | | | | | | | |
| September 30, 2020 | | December 31, 2019 | |
Assets | | | | |
Current assets | | | | |
Cash and cash equivalents | $ | 371,573 | | | $ | 234,679 | | |
Restricted cash | 16,393 | | | 12,769 | | |
Short-term investments | 129,809 | | | 70,029 | | |
Accounts receivable, net | 41,085 | | | 19,223 | | |
Inventory | 24,993 | | | 74,590 | | |
Loans held for sale | 41,921 | | | 21,985 | | |
Prepaid expenses | 7,698 | | | 14,822 | | |
Other current assets | 5,189 | | | 3,496 | | |
Total current assets | 638,661 | | | 451,593 | | |
Property and equipment, net | 42,210 | | | 39,577 | | |
Right-of-use assets, net | 45,392 | | | 52,004 | | |
Long-term investments | 17,072 | | | 30,978 | | |
Goodwill and intangibles, net | 11,138 | | | 11,504 | | |
Other non-current assets | 8,776 | | | 10,557 | | |
Total assets | $ | 763,249 | | | $ | 596,213 | | |
Liabilities, mezzanine equity and stockholders' equity | | | | |
Current liabilities | | | | |
Accounts payable | $ | 3,375 | | | $ | 2,122 | | |
Accrued liabilities | 57,517 | | | 38,022 | | |
Other payables | 10,550 | | | 7,884 | | |
Warehouse credit facilities | 40,308 | | | 21,302 | | |
Secured revolving credit facility | 14,923 | | | 4,444 | | |
Convertible senior notes, net | 124,495 | | | — | | |
Current lease liabilities | 11,682 | | | 11,408 | | |
Total current liabilities | 262,850 | | | 85,182 | | |
Non-current lease liabilities and deposits | 51,597 | | | 59,869 | | |
Convertible senior notes, net | — | | | 119,716 | | |
Non-current payroll tax liabilities | 8,711 | | | — | | |
Total liabilities | 323,158 | | | 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 | 39,812 | | | — | | |
Stockholders’ equity | | | | |
| | | | |
Common stock—par value $0.001 per share; 500,000,000 shares authorized; 100,241,416 and 93,001,597 shares issued and outstanding, respectively | 100 | | | 93 | | |
Additional paid-in capital | 684,219 | | | 583,097 | | |
Accumulated other comprehensive income | 308 | | | 42 | | |
Accumulated deficit | (284,348) | | | (251,786) | | |
Total stockholders’ equity | 400,279 | | | 331,446 | | |
Total liabilities, mezzanine equity and stockholders’ equity | $ | 763,249 | | | $ | 596,213 | | |
See Notes to the consolidated financial statements.
Redfin Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
(in thousands, except share and per share amounts, unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2020 | | 2019 | | 2020 | | 2019 |
Revenue | | | | | | | |
Service | $ | 217,280 | | | $ | 158,519 | | | $ | 469,893 | | | $ | 405,160 | |
Product | 19,636 | | | 80,164 | | | 171,683 | | | 141,445 | |
Total revenue | 236,916 | | | 238,683 | | | 641,576 | | | 546,605 | |
Cost of revenue | | | | | | | |
Service | 122,583 | | | 104,397 | | | 314,842 | | | 297,320 | |
Product | 21,261 | | | 80,909 | | | 174,744 | | | 144,807 | |
Total cost of revenue | 143,844 | | | 185,306 | | | 489,586 | | | 442,127 | |
Gross profit | 93,072 | | | 53,377 | | | 151,990 | | | 104,478 | |
Operating expenses | | | | | | | |
Technology and development | 22,452 | | | 18,801 | | | 60,687 | | | 50,421 | |
Marketing | 12,421 | | | 8,361 | | | 47,611 | | | 68,611 | |
General and administrative(1) | 21,190 | | | 18,779 | | | 68,539 | | | 57,881 | |
Total operating expenses | 56,063 | | | 45,941 | | | 176,837 | | | 176,913 | |
Income (loss) from operations | 37,009 | | | 7,436 | | | (24,847) | | | (72,435) | |
Interest income | 319 | | | 1,576 | | | 1,859 | | | 5,804 | |
Interest expense | (2,522) | | | (2,274) | | | (7,631) | | | (6,564) | |
Other income (expense), net | (640) | | | 44 | | | (1,943) | | | 172 | |
Net income (loss) | $ | 34,166 | | | $ | 6,782 | | | $ | (32,562) | | | $ | (73,023) | |
Dividend on convertible preferred stock | (1,530) | | | — | | | (2,814) | | | — | |
Undistributed earnings attributable to participating securities | (653) | | | — | | | — | | | — | |
Net income (loss) attributable to common stock—basic and diluted | $ | 31,983 | | | $ | 6,782 | | | $ | (35,376) | | | $ | (73,023) | |
Net income (loss) per share attributable to common stock—basic | $ | 0.32 | | | $ | 0.07 | | | $ | (0.36) | | | $ | (0.80) | |
Weighted average shares of common stock—basic | 99,840,144 | | | 91,994,731 | | | 97,365,122 | | | 91,279,086 | |
Net income (loss) per share attributable to common stock—diluted | 0.30 | | | 0.07 | | | (0.36) | | | (0.80) | |
Weighted average shares of common stock—diluted | 107,607,711 | | | 97,171,270 | | | 97,365,122 | | | 91,279,086 | |
| | | | | | | |
Other comprehensive income (loss) | | | | | | | |
Net income (loss) | $ | 34,166 | | | $ | 6,782 | | | $ | (32,562) | | | $ | (73,023) | |
Foreign currency translation adjustments | 6 | | | (10) | | | (16) | | | 28 | |
Unrealized gain (loss) on available-for-sale securities | (139) | | | (8) | | | 282 | | | (2) | |
Total comprehensive income (loss) | $ | 34,033 | | | $ | 6,764 | | | $ | (32,296) | | | $ | (72,997) | |
(1) Includes direct and incremental costs related to COVID-19 of $321 and $7,846, which are partially offset by $56 and $1,348 in employee retention credits allowed under the CARES Act, for the three and nine months ended September 30, 2020, respectively.
See Notes to the consolidated financial statements.
Redfin Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands, unaudited)
| | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2020 | | 2019 |
Operating Activities | | | |
Net loss | $ | (32,562) | | | $ | (73,023) | |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | | |
Depreciation and amortization | 10,581 | | | 6,366 | |
Stock-based compensation | 25,764 | | | 19,792 | |
Amortization of debt discount and issuance costs | 5,254 | | | 4,674 | |
Non-cash lease expense | 6,821 | | | 4,727 | |
Impairment costs | 2,063 | | | — | |
Other | (693) | | | (401) | |
Change in assets and liabilities: | | | |
Accounts receivable, net | (21,862) | | | (9,071) | |
Inventory | 49,597 | | | (82,766) | |
Prepaid expenses and other assets | 5,168 | | | (82) | |
Accounts payable | 851 | | | 579 | |
Accrued liabilities, other payables, and non-current payroll tax liabilities | 28,469 | | | 18,994 | |
Lease liabilities | (8,368) | | | (5,095) | |
Origination of loans held for sale | (479,153) | | | (285,182) | |
Proceeds from sale of loans originated as held for sale | 459,605 | | | 267,850 | |
Net cash provided by (used in) operating activities | 51,535 | | | (132,638) | |
Investing activities | | | |
Purchases of property and equipment | (10,391) | | | (12,821) | |
Purchases of investments | (135,118) | | | (106,063) | |
Sales of investments | 6,583 | | | 1,005 | |
Maturities of investments | 82,772 | | | 4,900 | |
Net cash used in investing activities | (56,154) | | | (112,979) | |
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 | 15,119 | | | 10,869 | |
Tax payments related to net share settlements on restricted stock units | (10,987) | | | (2,856) | |
Borrowings from warehouse credit facilities | 473,283 | | | 280,129 | |
Repayments to warehouse credit facilities | (454,277) | | | (262,875) | |
Borrowings from secured revolving credit facility | 57,378 | | | — | |
Repayments to secured revolving credit facility | (46,899) | | | — | |
Other payables—deposits held in escrow | 2,097 | | | 637 | |
Principal payments for finance lease obligations | (59) | | | — | |
| | | |
Cash paid for debt issuance costs | (4) | | | (152) | |
Net cash provided by financing activities | 145,153 | | | 25,752 | |
Effect of exchange rate changes on cash and cash equivalents | (16) | | | 28 | |
Net change in cash, cash equivalents, and restricted cash | 140,518 | | | (219,837) | |
Cash, cash equivalents, and restricted cash: | | | |
Beginning of period | 247,448 | | | 439,055 | |
End of period | $ | 387,966 | | | $ | 219,218 | |
Supplemental disclosure of cash flow information | | | |
Cash paid for interest | 3,001 | | | 2,460 | |
Non-cash transactions | | | |
Stock-based compensation capitalized in property and equipment | 1,714 | | | 931 | |
Property and equipment additions in accounts payable and accrued liabilities | 973 | | | 404 | |
Leasehold improvements paid directly by lessor | 37 | | | 4,298 | |
See Notes to the consolidated financial statements.
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, June 30, 2019 | — | | | $ | — | | | | 91,777,537 | | | $ | 92 | | | $ | 562,894 | | | $ | (250,785) | | | $ | 44 | | | $ | 312,245 | |
Issuance of common stock pursuant to employee stock purchase program | — | | | — | | | | — | | | — | | | — | | | — | | | — | | | — | |
Issuance of common stock pursuant to exercise of stock options | — | | | — | | | | 297,475 | | | — | | | 1,897 | | | — | | | — | | | 1,897 | |
Issuance of common stock pursuant to settlement of restricted stock units | — | | | — | | | | 195,840 | | | — | | | — | | | — | | | — | | | — | |
Common stock surrendered for employees' tax liability upon settlement of restricted stock units | — | | | — | | | | (58,536) | | | — | | | (1,064) | | | — | | | — | | | (1,064) | |
Stock-based compensation | — | | | — | | | | — | | | — | | | 7,880 | | | — | | | — | | | 7,880 | |
Other comprehensive loss | — | | | — | | | | — | | | — | | | — | | | — | | | (18) | | | (18) | |
Net income | — | | | — | | | | — | | | — | | | — | | | 6,782 | | | — | | | 6,782 | |
Balance, September 30, 2019 | — | | | $ | — | | | | 92,212,316 | | | $ | 92 | | | $ | 571,607 | | | $ | (244,004) | | | $ | 26 | | | $ | 327,721 | |
| | | | | | | | | | | | | | | | |
Balance, June 30, 2020 | 40,000 | | | $ | 39,801 | | | | 99,394,432 | | | $ | 99 | | | $ | 673,234 | | | $ | (318,514) | | | $ | 441 | | | $ | 355,260 | |
Issuance of convertible preferred stock, net | — | | | 11 | | | | — | | | — | | | — | | | — | | | — | | | — | |
Issuance of common stock as dividend on convertible preferred stock | — | | | — | | | | 30,640 | | | — | | | — | | | — | | | — | | | — | |
Issuance of common stock, net | — | | | — | | | | — | | | — | | | — | | | — | | | — | | | — | |
Issuance of common stock pursuant to employee stock purchase program | — | | | — | | | | — | | | — | | | — | | | — | | | — | | | — | |
Issuance of common stock pursuant to exercise of stock options | — | | | — | | | | 567,854 | | | 1 | | | 3,997 | | | — | | | — | | | 3,998 | |
Issuance of common stock pursuant to settlement of restricted stock units | — | | | — | | | | 353,160 | | | — | | | — | | | — | | | — | | | — | |
Common stock surrendered for employees' tax liability upon settlement of restricted stock units | — | | | — | | | | (104,670) | | | — | | | (4,922) | | | — | | | — | | | (4,922) | |
Stock-based compensation | — | | | — | | | | — | | | — | | | 11,910 | | | — | | | — | | | 11,910 | |
Other comprehensive loss | — | | | — | | | | — | | | — | | | — | | | — | | | (133) | | | (133) | |
Net income | — | | | — | | | | — | | | — | | | — | | | 34,166 | | | — | | | 34,166 | |
Balance, September 30, 2020 | 40,000 | | | $ | 39,812 | | | | 100,241,416 | | | $ | 100 | | | $ | 684,219 | | | $ | (284,348) | | | $ | 308 | | | $ | 400,279 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 | — | | | — | | | | 1,397,074 | | | 2 | | | 7,665 | | | — | | | — | | | 7,667 | |
Issuance of common stock pursuant to settlement of restricted stock units | — | | | — | | | | 562,755 | | | — | | | — | | | — | | | — | | | — | |
Common stock surrendered for employees' tax liability upon settlement of restricted stock units | — | | | — | | | | (160,964) | | | — | | | (2,856) | | | — | | | — | | | (2,856) | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Stock-based compensation | — | | | — | | | | — | | | — | | | 20,723 | | | — | | | — | | | 20,723 | |
Other comprehensive income | — | | | — | | | | — | | | — | | | — | | | — | | | 26 | | | 26 | |
Net loss | — | | | — | | | | — | | | — | | | — | | | (73,023) | | | — | | | (73,023) | |
Balance, September 30, 2019 | — | | | $ | — | | | | 92,212,316 | | | $ | 92 | | | $ | 571,607 | | | $ | (244,004) | | | $ | 26 | | | $ | 327,721 | |
| | | | | | | | | | | | | | | | |
Balance, December 31, 2019 | — | | | $ | — | | | | 93,001,597 | | | $ | 93 | | | $ | 583,097 | | | $ | (251,786) | | | $ | 42 | | | $ | 331,446 | |
Issuance of convertible preferred stock, net | 40,000 | | | 39,812 | | | | — | | | — | | | — | | | — | | | — | | | — | |
Issuance of common stock as dividend on convertible preferred stock | — | | | — | | | | 30,640 | | | — | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | | |
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 | — | | | — | | | | 1,825,684 | | | 2 | | | 11,500 | | | — | | | — | | | 11,502 | |
Issuance of common stock pursuant to settlement of restricted stock units | — | | | — | | | | 1,017,675 | | | 1 | | | (1) | | | — | | | — | | | — | |
Common stock surrendered for employees' tax liability upon settlement of restricted stock units | — | | | — | | | | (305,410) | | | — | | | (10,987) | | | — | | | — | | | (10,987) | |
Stock-based compensation | — | | | — | | | | — | | | — | | | 27,477 | | | — | | | — | | | 27,477 | |
Other comprehensive income | — | | | — | | | | — | | | — | | | — | | | — | | | 266 | | | 266 | |
Net loss | — | | | — | | | | — | | | — | | | — | | | (32,562) | | | — | | | (32,562) | |
Balance, September 30, 2020 | 40,000 | | | $ | 39,812 | | | | 100,241,416 | | | $ | 100 | | | $ | 684,219 | | | $ | (284,348) | | | $ | 308 | | | $ | 400,279 | |
See Notes to the consolidated financial statements.
Index to Notes to 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: | | |
Note 16: | | |
Redfin Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts, unaudited)
Note 1: Summary of 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”).
The financial information as of December 31, 2019 that is included in this quarterly report is derived from the audited consolidated financial statements and notes for the year ended December 31, 2019 included in Item 8 in our annual report for the year ended December 31, 2019. Such financial information should be read in conjunction with the notes and management’s discussion and analysis of the consolidated financial statements included in our annual report.
The unaudited consolidated interim financial statements, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, necessary to present fairly our financial position as of September 30, 2020, the statements of comprehensive income (loss) and statements of changes in mezzanine equity and stockholders’ equity for the three and nine months ended September 30, 2020 and 2019, and the statement of cash flows for the nine months ended September 30, 2020 and 2019. The results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020 or for any interim period or for any other future year.
Principles of Consolidation—The unaudited consolidated interim financial statements include the accounts of Redfin and its wholly owned subsidiaries, including those entities in which we have a variable interest and of which we are the primary beneficiary. Intercompany transactions and balances have been eliminated.
COVID-19 Risks, Impacts and Uncertainties—We are subject to the risks arising from COVID-19's impacts on the residential real estate industry. Our management believes that these impacts, which include but are not limited to the following, could have a significant negative effect on our future financial position, results of operations, and cash flows: (i) prohibitions or limitations on in-person activities associated with residential real estate transactions; (ii) lack of consumer desire for in-person interactions and physical home tours; and (iii) deteriorating economic conditions, such as increased unemployment rates, recessionary conditions, lower yields on individuals' investment portfolios, and more stringent mortgage financing conditions. In addition, we have considered the impacts and uncertainties of COVID-19 in our use of estimates in preparation of our consolidated financial statements. These estimates include, but are not limited to, likelihood of achieving performance conditions under performance-based equity awards, net realizable value of inventory, and the fair value of reporting units and goodwill for impairment.
In April 2020, we reduced our number of employees by approximately 400 people and placed an additional 1,000 employees on furlough. As of the effective date of any furlough, we provided transition pay to each employee and for any employee enrolled in our health-care benefit plans, we continued to provide benefits through the duration of their furlough. These actions taken in response to the economic impact of COVID-19 on our business resulted in a charge of $321 and $7,846 for the three and nine months ended September 30, 2020, respectively. These costs are included in general and administrative expenses, as these costs were determined to be direct and incremental, and not related to revenue generating activities. These costs were partially offset by $56 and $1,348 in employee retention credits claimed under the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") for the three and nine months ended September 30, 2020, respectively, which are also included as a reduction to general and administrative expenses. Pursuant to the CARES Act, we elected to defer eligible payroll taxes beginning in April 2020, which will be due in two equal installments in 2021 and 2022.
Use of Estimates—The 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. We evaluate our estimates on an ongoing basis. In January 2020 we adopted ASU 2016-13, Financial Instruments—Credit Losses (Topic 326), which
modifies the measurement of credit losses on financial instruments. As part of the adoption we estimated the current expected credit losses for certain classes of relevant assets. The amounts realized from the affected assets will depend on, among other factors, general business conditions, including the impacts from COVID-19, and could differ in the near term from carrying amounts reflected in the consolidated financial statements. Further description of the impact of this pronouncement is included in "—Recently Adopted Accounting Pronouncements."
Accounts Receivable and Allowance for Credit Losses—We have two material classes of receivables: (i) real estate services receivables and (ii) receivables from the sale of homes through our properties business. Accounts receivable related to these classes represent closed transactions for which cash has not yet been received. We establish an allowance for expected credit losses based on historical experience of collectibility, current external economic conditions that may affect collectibility, and current or expected changes to the regulatory environment in which we operate our real estate services and properties businesses. As the majority of our transactions are processed through escrow, collectibility is not a significant risk, and we have determined the nature of our receivables to have similar credit quality indicators. We evaluate for changes in credit quality indicators on an annual basis or in the event of a material economic event or material change in the regulatory environment in which we operate, with the most recent assessment being performed in June 2020.
Investments—We have two types of investments: (i) available-for-sale investments that are available to support our operational needs, which are reported on the balance sheets as short-term and long-term investments, and (ii) long-term equity investments accounted for under the cost method, which are reported in other non-current assets.
Available-for-sale
Our short-term and long-term investments consist primarily of U.S. treasury securities, including inflation protected securities, and other federal or local government issued 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 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. We evaluate our available-for-sale securities, both ones classified as cash equivalents and as investments, for expected credit losses on a quarterly basis. An expected credit loss reserve is charged against the fair value of an available-for-sale debt security when it is identified, with a credit loss charged against net earnings. We review factors to determine whether an expected credit loss exists based on credit quality indicators, such as the extent to which the fair value as of the reporting date is less than the amortized cost basis, present value of cash flows expected to be collected, the financial condition and prospects of the issuer, adverse conditions specifically related to the security, and any changes to the credit rating of the security by a rating agency. Realized gains and losses are accounted for using the specific identification method. Purchases and sales are recorded on a trade date basis.
Cost Method Investments
We have purchased equity interests in privately held companies, which are classified as long-term. The investments are equity securities without readily determinable fair values that are 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. We perform a qualitative assessment considering impairment indicators to evaluate whether the investments are impaired as of the end of each reporting period. See Note 3 for information on our assessment.
Mezzanine Equity—We have issued convertible preferred stock that we have determined is a financial instrument with both equity and debt characteristics and are such classified as mezzanine equity in our consolidated financial statements. The instrument is initially recognized at fair value net of issuance costs. We reassess whether the instrument is currently redeemable or probable to become redeemable in the future as of each reporting date, in which, if the instrument meets either criteria, we will accrete the carrying value to the
redemption value based on the effective interest method over the remaining term. To assess classification, we review all features of the instrument, including mandatory redemption features and conversion features that may be substantive. All financial instruments that are classified as mezzanine equity are evaluated for embedded derivative features by evaluating each feature against the nature of the host instrument (e.g. more equity-like or debt-like). Features identified as embedded derivatives that are material are recognized separately as a derivative asset or liability in the consolidated financial statements. We have evaluated our convertible preferred stock and determined that its nature is that of an equity host and no material embedded derivatives exist that would require bifurcation on our balance sheet. See Note 11 for more information.
Advertising and Advertising Production Costs—We expense advertising costs as they are incurred and advertising production costs as of the first date the advertisement takes place. Advertising costs totaled $9,374 and $5,279 for the three months ended September 30, 2020 and 2019, respectively, and $38,961 and $59,357 for the nine months ended September 30, 2020 and 2019, respectively, and are included in marketing expenses. Advertising production costs totaled $8 and $17 for the three months ended September 30, 2020 and 2019, respectively, and $209 and $166 for the nine months ended September 30, 2020 and 2019, respectively, and are included in marketing expenses.
Recently Adopted Accounting Pronouncements—In January 2020, we adopted ASU 2016-13, Financial Instruments—Credit Losses (Topic 326), using a modified-retrospective approach. 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 pronouncement, along with the related subsequent pronouncements that include clarifications, 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. The adoption of this pronouncement did not have a material impact on our consolidated financial statements. See "—Accounts Receivable and Allowance for Credit Losses" for specific accounting policies for accounts receivable and available-for-sale debt securities, and see Note 2 and Note 3 for additional impacts from the adoption.
Recently Issued Accounting Pronouncements—In August 2020, the Financial Accounting Standards Board issued authoritative guidance under ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity, which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity's own equity. This guidance removes the liability and equity separation models for convertible instruments with a cash conversion feature or beneficial conversion feature. As a result, after adoption, entities will not separately present in equity an embedded conversion feature in such debt. Similarly, the embedded conversion feature will no longer be amortized into income as interest expense over the life of the instrument. Instead, entities will account for a convertible debt instrument wholly as debt unless (1) a convertible instrument contains features that require bifurcation as a derivative under ASC Topic 815, Derivatives and Hedging, or (2) a convertible debt instrument was issued at a substantial premium. Among other potential impacts, this change is expected to reduce reported interest expense, increase reported net income, and result in a reclassification of certain conversion features from stockholders' equity to liabilities as it relates to certain convertible debt instruments. Additionally, this guidance requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share. The ASU is effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. We have not yet completed our assessment of the impact of the new standard on our consolidated financial statements.
Note 2: Segment Reporting and Revenue
In operation of the business, our management, including our chief operating decision maker, who is also our chief executive officer, evaluates the performance of our operating segments based on revenue and gross profit. We do 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. We have five operating segments and two reportable segments, real estate services and properties.
We generate revenue primarily from commissions and fees charged on real estate services transactions closed by our lead agents or partner agents, and from the sale of homes. Our key revenue components are brokerage revenue, partner revenue, properties revenue, and other revenue.
Information on each of the reportable and other segments and reconciliation to consolidated net loss is as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2020 | | 2019 | | 2020 | | 2019 |
Real estate services | | | | | | | |
Brokerage revenue | $ | 194,375 | | | $ | 146,096 | | | $ | 425,269 | | | $ | 372,809 | |
Partner revenue | 15,478 | | | 8,030 | | | 28,269 | | | 20,053 | |
Total real estate services revenue | 209,853 | | | 154,126 | | | 453,538 | | | 392,862 | |
Cost of revenue | 117,944 | | | 100,048 | | | 300,305 | | | 284,447 | |
Gross profit | 91,909 | | | 54,078 | | | 153,233 | | | 108,415 | |
Properties | | | | | | | |
Revenue | 19,005 | | | 80,164 | | | 170,287 | | | 141,445 | |
Cost of revenue | 20,460 | | | 80,909 | | | 173,107 | | | 144,807 | |
Gross profit | (1,455) | | | (745) | | | (2,820) | | | (3,362) | |
Other | | | | | | | |
Revenue | 8,503 | | | 5,161 | | | 19,999 | | | 13,490 | |
Cost of revenue | 5,885 | | | 5,117 | | | 18,422 | | | 14,065 | |
Gross profit | 2,618 | | | 44 | | | 1,577 | | | (575) | |
Intercompany eliminations | | | | | | | |
Revenue | (445) | | | (768) | | | (2,248) | | | (1,192) | |
Cost of revenue | (445) | | | (768) | | | (2,248) | | | (1,192) | |
Gross profit | — | | | — | | | — | | | — | |
Consolidated | | | | | | | |
Revenue | 236,916 | | | 238,683 | | | 641,576 | | | 546,605 | |
Cost of revenue | 143,844 | | | 185,306 | | | 489,586 | | | 442,127 | |
Gross profit | 93,072 | | | 53,377 | | | 151,990 | | | 104,478 | |
Operating expenses | 56,063 | | | 45,941 | | | 176,837 | | | 176,913 | |
Interest income | 319 | | | 1,576 | | | 1,859 | | | 5,804 | |
Interest expense | (2,522) | | | (2,274) | | | (7,631) | | | (6,564) | |
Other income (expense), net | (640) | | | 44 | | | (1,943) | | | 172 | |
Net Income (loss) | $ | 34,166 | | | $ | 6,782 | | | $ | (32,562) | | | $ | (73,023) | |
Revenue earned but not received is recorded as accounts receivable on our consolidated balance sheets, net of an allowance for expected credit losses. Accounts receivable consists primarily of commission revenue and proceeds from the sale of homes in-transit through the escrow process, and therefore it is not estimated. Based on the regulated environment in which we operate and the nature of our receivables, we do not expect material credit losses, and write-offs were immaterial in the periods presented.
Note 3: Financial Instruments
Derivatives
Our primary market exposure is to interest rate risk, specifically U.S. treasury and mortgage interest rates, due to their impact on mortgage-related assets and commitments. We use forward sales commitments on whole loans and mortgage-backed securities to manage and reduce this risk. We do not have any derivative instruments designated as hedging instruments.
Interest Rate Lock Commitments—Interest rate lock commitments ("IRLCs") represent an agreement to extend credit to a mortgage loan applicant. We commit (subject to loan approval) to fund the loan at the specified rate, regardless of changes in market interest rates between the commitment date and the funding date. Outstanding IRLCs are subject to interest rate risk and related price risk during the period from the date of
commitment through the loan funding date or expiration date. Loan commitments generally range between 30 and 90 days and the borrower is not obligated to obtain the loan. Therefore, IRLCs are subject to fallout risk, which occurs when approved borrowers choose not to close on the underlying loans. We review our commitment-to-closing ratio (pull-through rate) as part of an estimate of the number of mortgage loans that will fund according to the IRLCs.
Forward Sales Commitments—We are exposed to interest rate and price risk on loans held for sale from the funding date until the date the loan is sold. Forward sales commitments on whole loans and mortgage-backed securities are used to fix the forward sales price that will be realized at the sale of each loan.
| | | | | | | | | | | | | | |
Notional Amounts | | September 30, 2020 | | December 31, 2019 |
Interest rate lock commitments | | $ | 74,681 | | | $ | 37,453 | |
Forward sales commitments | | 116,091 | | | 39,447 | |
The locations and amounts of gains (losses) recognized in income related to our derivatives are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended September 30, | | Nine Months Ended September 30, | | |
Instrument | | Classification | | 2020 | | 2019 | | 2020 | | 2019 | | |
Interest rate lock commitments | | Service revenue | | $ | (233) | | | $ | (209) | | | $ | 1,131 | | | $ | 225 | | | |
Forward sales commitments | | Service revenue | | 553 | | | 554 | | | 442 | | | 312 | | | |
Fair Value of Financial Instruments
A summary of assets and liabilities related to our financial instruments, measured at fair value on a recurring basis and as reflected in our consolidated balance sheets, is set forth below:
| | | | | | | | | | | | | | | | | | | | | | | |
| Balance at September 30, 2020 | | 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 | $ | 336,821 | | | $ | 336,821 | | | $ | — | | | $ | — | |
U.S. treasury securities | 5,351 | | | 5,351 | | | — | | | — | |
Total cash equivalents | 342,172 | | | 342,172 | | | — | | | — | |
Short-term investments | | | | | | | |
U.S. treasury securities | 129,809 | | | 129,809 | | | — | | | — | |
Loans held for sale | 41,921 | | | — | | | 41,921 | | | — | |
Prepaid expenses and other current assets | | | | | | | |
Interest rate lock commitments | 1,965 | | | — | | | — | | | 1,965 | |
Forward sales commitments | 763 | | | — | | | 763 | | | — | |
Total prepaid expenses and other current assets | 2,728 | | | — | | | 763 | | | 1,965 | |
Long-term investments | | | | | | | |
U.S. treasury securities | 5,150 | | | 5,150 | | | — | | | — | |
Agency bonds | 11,922 | | | 11,922 | | | — | | | — | |
Total long-term investments | 17,072 | | | 17,072 | | | — | | | — | |
Total assets | $ | 533,702 | | | |