REDFIN CORPORATION
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

INDEX

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Unaudited Pro Forma Combined Financial Information
(in thousands)

On February 19, 2021, Redfin Corporation ("we,” “us,” or “our”), entered into an Asset Purchase Agreement (the "Agreement") with RentPath Holdings, Inc. ("RentPath") and certain of RentPath’s wholly owned subsidiaries (together with RentPath, the “Sellers”). RentPath is a digital marketing solutions company that connects consumers with available apartments and houses for rent. Under the Agreement, we acquired, for $608,000 in cash, all of the equity interests of RentPath (the “Acquisition”), as reorganized following an internal restructuring of the Sellers (“Reorganized RentPath”) pursuant to the joint chapter 11 plan of reorganization of the Sellers in the chapter 11 cases of the Sellers (the "Plan") and certain of their affiliates filed on February 12, 2020 in the U.S. Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”). In connection with the internal restructuring, certain assets and liabilities related to the Sellers’ business of providing digital media services to clients in the residential real estate business were transferred to Reorganized RentPath, and the remaining assets and liabilities were transferred to a wind-down company called Wind Down Co. We completed the Acquisition of RentPath on April 2, 2021.

Our unaudited pro forma combined financial information is presented for informational purposes only and is not intended to represent or be indicative of the results of operations that would have been achieved if the Acquisition had been completed on an earlier date, and should not be taken as representative of our future consolidated results of operations or financial condition. Preparation of our unaudited pro forma combined financial information for all periods presented required management to make certain judgments and estimates to determine the transaction accounting adjustments such as purchase accounting adjustments, which include, among others, amortization charges from acquired intangible assets. The transaction accounting adjustments are based on the information currently available and the assumptions and estimates underlying the transaction accounting adjustments are described in the accompanying notes. Actual results may differ from the assumptions used to present the accompanying unaudited pro forma combined financial information. The unaudited pro forma combined financial information also reflects reclassification adjustments to certain financial statement captions included in RentPath’s historical consolidated financial statements to align with the corresponding financial statement captions included in our historical presentation. The reclassifications had no impact on the historical results of operations, net income (loss), total assets, total liabilities, or total stockholders' equity reported by us or RentPath. The unaudited pro forma combined financial information also reflects bankruptcy reorganization and emergence adjustments that were completed immediately prior to the Acquisition. The adjustments are made to reflect liabilities which were compromised as a result of bankruptcy and are not our obligations after the completion of the Acquisition, as well as other costs incurred by RentPath that were directly attributable to the bankruptcy proceedings.

Our unaudited pro forma combined financial information should be read in conjunction with our historical consolidated financial statements and notes thereto and other financial information included in our annual report on Form 10-K for the year ended December 31, 2020 and our quarterly report on Form 10-Q for the three months ended March 31, 2021, and the audited consolidated financial statements of RentPath as of and for the period ended December 31, 2020 and the unaudited consolidated financial statements of RentPath as of and for the period ended March 31, 2021 (included in exhibits 99.1 and 99.2, respectively).




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Unaudited Pro Forma Combined Balance Sheet
As of March 31, 2021
(in thousands)

HistoricalBankruptcyTransaction AccountingReclassification
RedfinRentPathAdjustmentsAdjustmentsAdjustmentsPro Forma
March 31, 2021(Note 3)(Note 4)(Note 5)Combined
Assets
Current assets
Cash and cash equivalents$1,241,255 $60,369 (60,369)(d)$(547,200)(e)— $694,055 
Restricted cash101,790 17,144 (17,144)(d)(60,800)(e)— 40,990 
Short-term investments140,843 — — — — 140,843 
Accounts receivable, net47,416 6,939 — — — 54,355 
Inventory97,371 — — — — 97,371 
Loans held for sale43,447 — — — — 43,447 
Prepaid expenses15,224 7,324 — — (1,185)(q)21,363 
Other current assets7,014 — — — — 7,014 
Total current assets1,694,360 91,776 (77,513)(608,000)(1,185)1,099,438 
Property and equipment, net47,649 21,495 — (18,392)(f)— 50,752 
Right-of-use assets, net47,932 — — 12,330 (g)— 60,262 
Long-term investments6,906 — — — — 6,906 
Intangibles, net1,708 109,593 — 101,407 (h)— 212,708 
Goodwill9,186 307,705 — 100,119 (h)— 417,010 
Other assets, noncurrent8,836 — — — — 8,836 
Total assets1,816,577 530,569 (77,513)(412,536)(1,185)1,855,912 
Liabilities, mezzanine equity, and stockholder’s equity
Current liabilities:
Accounts payable15,568 5,124 (3,593)(a)— — 17,099 
Accrued liabilities75,75436,817(28,931)(a)5,615 (i)— 89,255 
Other payables19,117— — — — 19,117 
Warehouse credit facilities40,663 — — — — 40,663 
Secured revolving credit facility48,851 — — — — 48,851 
Debtors-in-possession financing— 88,593 (88,593)(b)— — — 
Convertible senior notes, net23,428 — — — — 23,428 
Lease liabilities12,611 — — 1,264 (g)— 13,875 
Total current liabilities235,992 130,534 (121,117)6,879 — 252,288 
Lease liabilities and deposits, noncurrent53,333 — — 11,066 (g)— 64,399 
Convertible senior notes, net, noncurrent1,136,974 — — — — 1,136,974 
Payroll tax liabilities, noncurrent6,812 — — — 1,030 (r)7,842 
Other noncurrent liabilities— 6,367 — (5,337)(g)(1,030)(r)— 
Deferred tax liability, net— 12,988 (12,988)(o)17,743 (o)— 17,743 
Liabilities subject to compromise— 712,993 (712,993)(a)— — — 
Total liabilities1,433,111 862,882 (847,098)30,351 — 1,479,246 
Series A convertible preferred stock—par value $0.001 per share; 10,000,000 shares authorized; 40,000 shares issued and outstanding39,834 — — — — 39,834 
Stockholders’ equity
Common stock104 4,117 — (4,117)(j)— 104 
Additional paid-in capital641,702 176,921 — (176,921)(j)— 641,702 
Accumulated other comprehensive (loss) income161 — — — — 161 
Retained earnings (accumulated deficit)(298,335)(513,351)— 513,351 (j)— (298,335)
(5,615)(i)(5,615)
(1,185)(q)(1,185)
Total stockholders’ equity343,632 (332,313)— 326,698 (1,185)336,832 
Total liabilities, mezzanine equity, and stockholders’ equity$1,816,577 $530,569 $(847,098)$357,049 $(1,185)$1,855,912 
See Notes to the unaudited pro forma combined financial information.







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Unaudited Pro Forma Combined Statement of Comprehensive (Loss) Income
For the Three Months Ended March 31, 2021
(in thousands, except share and per share amounts)

Historical
RedfinRentPathBankruptcyTransaction AccountingReclassification
Three Months EndedAdjustmentsAdjustmentsAdjustmentsPro Forma
March 31, 2021(Note 3)(Note 4)(Note 5)Combined
Revenue
Service$175,593 $42,924 $— $— $— $218,517 
Product92,726 — — — — 92,726 
Total revenue268,319 42,924 — — — 311,243 
Cost of revenue
Service134,851 3,929 — — 3,775 (s)142,555 
Product91,110 — — — — 91,110 
Total cost of revenue225,961 3,929 — — 3,775 233,665 
Gross profit42,358 38,995 — — (3,775)77,578 
Operating expenses
Technology and development27,678 — — — 12,018 (t)39,696 
Marketing11,802 28,032 — — (15,290)(u)24,544 
Depreciation and amortization of property and equipment— 4,717 — 3,924 (k)(8,641)(v)— 
Amortization of intangible assets— 424 — — (424)(w)— 
General and administrative37,391 7,701 — 5,615 (i)9,747 (x) (q)60,454 
Reorganization items— 21,155 (21,155)(c)— — — 
Total operating expenses76,871 62,029 (21,155)9,539 (2,590)124,694 
Income (loss) from operations(34,513)(23,034)21,155 (9,539)(1,185)(47,116)
Interest income159 — — — — 159 
Interest expense(1,338)(1,482)— 1,482 (l)— (1,338)
Other income, net(92)52,037 — (52,037)(m)— (92)
(Provision) benefit for income taxes— (330)— 2,229 (p)— 1,899 
Net loss$(35,784)$27,191 $21,155 $(57,865)$(1,185)$(46,488)
Dividends on convertible preferred stock(2,336)— — — — (2,336)
Net loss attributable to common stock - basic and diluted(38,120)27,191 21,155 (57,865)(1,185)(48,824)
Net loss per share attributable to common stock - basic and diluted$(0.37)$— $— $— $— $(0.47)
Weighted average shares to compute net loss per share attributable to common stock—basic and diluted103,427,764 — — — — 103,427,764 
Net loss$(35,784)$27,191 $21,155 $(57,865)$(1,185)$(46,488)
Other comprehensive loss
Unrealized gain (loss) on available-for-sale securities(50)— — — — (50)
Total other comprehensive loss(50)— — — — (50)
Comprehensive (loss) income$(35,834)$27,191 $21,155 $(57,865)$(1,185)$(46,538)
See Notes to the unaudited pro forma combined financial information.

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Unaudited Pro Forma Combined Statement of Comprehensive Loss
For the Year Ended December 31, 2020
(in thousands, except share and per share amounts)

Historical
RedfinRentPathBankruptcyTransaction AccountingReclassification
Twelve Months EndedAdjustmentsAdjustmentsAdjustmentsPro Forma
December 31, 2020(Note 3)(Note 4)(Note 5)Combined
Revenue
Service$674,345 $194,389 $— $— $— $868,734 
Product211,748 — — — — 211,748 
Total revenue886,093 194,389 — — — 1,080,482 
Cost of revenue
Service437,484 16,670 — — 13,593 (s)467,747 
Product216,499 — — — — 216,499 
Total cost of revenue653,983 16,670 — — 13,593 684,246 
Gross profit232,110 177,719 — — (13,593)396,236 
Operating expenses
Technology and development84,297 — — — 49,914 (t)134,211 
Marketing54,881 140,389 — — (64,842)(u)130,428 
Depreciation and amortization of property and equipment— 20,517 — 14,329 (k)(34,846)(v)— 
Amortization of intangible assets— 1,742 — — (1,742)(w)— 
General and administrative92,140 31,666 — 5,615 (i)37,923 (x)167,344 
Reorganization items— 68,491 (68,491)(c)— — — 
Total operating expenses231,318 262,805 (68,491)19,944 (13,593)431,983 
Income (loss) from operations792 (85,086)68,491 (19,944)— (35,747)
Interest income2,074 — — — — 2,074 
Interest expense(19,495)(30,257)— 30,257 (l)— (19,495)
Other income, net(1,898)5,895 — (5,895)(m)— (1,898)
Benefit from income taxes— 3,104 — 5,480 (p)— 8,584 
Net loss$(18,527)$(106,344)$68,491 $9,898 $— $(46,482)
Dividends on convertible preferred stock(4,454)— — — — (4,454)
Net loss attributable to common stock - basic and diluted(22,981)(106,344)68,491 9,898 — (50,936)
Net loss per share attributable to common stock - basic and diluted$(0.23)$— $— $— $— $(0.52)
Weighted average shares to compute net loss per share attributable to common stock—basic and diluted98,574,529 — — — — 98,574,529 
Net loss$(18,527)$(106,344)$68,491 $9,898 $— $(46,482)
Other comprehensive income
Foreign currency translation adjustments(3)— — — — (3)
Realized gain on cash flow hedges— 2,824 — (2,824)(n)— — 
Unrealized gain (loss) on available-for-sale securities172 — — — — 172 
Total other comprehensive income169 2,824 — (2,824)— 169 
Comprehensive loss$(18,358)$(103,520)$68,491 $7,074 $— $(46,313)
See Notes to the unaudited pro forma combined financial information.

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Redfin Corporation
Notes to the Unaudited Pro Forma Combined Financial Information
(in thousands)

Note 1: Basis of Presentation

On April 2, 2021, we completed our acquisition of RentPath whereby we acquired RentPath in a transaction accounted for using the purchase method of accounting in accordance with FASB ASC 805, Business Combinations. Under this method of accounting, the total purchase price of $608,000 was made up of all cash consideration.

The unaudited pro forma combined financial information is presented for informational purposes only and is not intended to represent or be indicative of the results of operations that would have been achieved if the Acquisition had been completed on an earlier date, and should not be taken as representative of our future consolidated results of operations or financial condition. Preparation of the unaudited pro forma combined financial information for all periods presented required management to make certain judgments and estimates to determine the transaction accounting adjustments, such as purchase accounting adjustments, which include, among others, amortization charges from acquired intangible assets. This information has been prepared in accordance with Article 11 of Regulation S-X, and is for informational purposes only and is subject to a number of uncertainties and assumptions as described in the accompanying notes.

The unaudited pro forma combined balance sheet as of March 31, 2021 is based on the historical balance sheets of us and RentPath and have been prepared to reflect the Acquisition and related adjustments as if the Acquisition had been consummated on March 31, 2021. The unaudited pro forma combined consolidated statements of comprehensive income (loss) for the three months ended March 31, 2021 and the year ended December 31, 2020 combines ours and RentPath’s historical consolidated statements of comprehensive income (loss) as if the Acquisition had been consummated on January 1, 2020. The unaudited pro forma combined financial statements noted above are also presented under FASB ASC Topic 606, Revenues from Contracts with Customers, and FASB ASC Topic 842, Leases, for both us and RentPath.

Note 2: Calculation of Purchase Price Consideration and Purchase Price Allocation

Calculation of Purchase Price Consideration—The fair value of consideration transferred on the closing date includes cash consideration in the amount of $608,000.

Preliminary Purchase Price Allocation—The total purchase price has been allocated to RentPath’s tangible and intangible assets acquired and liabilities assumed based on their estimated fair value at April 2, 2021.

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The preliminary allocation of the purchase price is as follows:

Assets acquired
Accounts receivable$6,939 
Other current assets7,324 
Property and equipment, net3,103 
Operating lease right-of-use assets12,330 
Intangible assets211,000 
Goodwill407,824 
Total assets acquired648,520 
Liabilities assumed
Accounts payable(1,531)
Accrued liabilities(9,150)
Long-term liabilities(29,839)
Total liabilities assumed(40,520)
Net assets acquired$608,000 

Identifiable intangible assets—The identifiable intangible assets include trade names, an application platform, and customer relationships. Trade names primarily relate to the RentPath brand. The application platform relates to the RentPath website and mobile application and is the primary channel for meeting customers. Customer relationships represent existing contracts that relate primarily to underlying customer relationships.

Goodwill—Approximately $407,824 has been allocated to goodwill. Goodwill represents the excess of the purchase price over the fair value of the net assets acquired. In accordance with FASB ASC 350, Intangibles - Goodwill and Other, goodwill will not be amortized but instead will be tested for impairment at least annually (more frequently if certain indicators are present). In the event that we determine the value of goodwill has become impaired, we will incur an accounting charge for the amount of impairment during the fiscal quarter in which the determination is made.

Note 3: Bankruptcy Adjustments

The following adjustments reflect RentPath’s liability amounts that were transferred to Wind Down Co. and will not be obligations assumed by us as part of the Acquisition, in addition to costs that were incurred directly by RentPath as a result of the bankruptcy proceeding:

a. Adjustment to eliminate liabilities that were transferred to Wind Down Co. in accordance with the Bankruptcy Court’s order and the Agreement.

b. Adjustment to eliminate debtors-in-possession financing that was transferred to Wind Down Co. in accordance with the Bankruptcy Court’s order and the Agreement.

c. Adjustment to eliminate reorganization items relating entirely to RentPath's bankruptcy proceedings from the unaudited pro forma combined statement of comprehensive income (loss) as these items are directly attributable to RentPath’s chapter 11 reorganization and are included in the historical results.

d. Adjustment to eliminate cash and cash equivalents and restricted cash that were not transferred to us and were transferred to Wind Down Co.

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Note 4. Transaction Accounting Adjustments

The transaction accounting adjustments included in the unaudited pro forma combined financial statements are as follows:

e. Adjustments to reflect the cash purchase price of $608,000 which included $60,800 of restricted cash.

f. Adjustment to eliminate internal-use software assets, which RentPath historically classified within property and equipment, net, but are deemed part of the Application Platform intangible asset acquired by us that will be recognized at fair value as a result of the Acquisition. Refer to adjustment “h” below for information regarding the fair value of acquired intangible assets.

g. Adjustment to reflect the implementation of ASC 842 by RentPath to conform to the adoption date as a public business entity and our associated accounting policies.

h. Adjustment to record the fair value of acquired intangible assets of $211,000 and goodwill of $407,824.

i. Adjustment for transaction costs incurred, or are expected to be incurred, by us or RentPath after March 31, 2021, which have not yet been included in historical financial statements.

Balance SheetIncome Statement
As of March 31, 2021Three Months Ended
March 31, 2021
Transaction costs incurred by RentPath$— $— 
Transaction costs incurred by Redfin(5,615)(5,615)
Total transaction costs$(5,615)$(5,615)

j. Adjustment to eliminate RentPath’s historical equity balances, including common stock.

k. Adjustment to record amortization of intangible assets recorded as a result of the measurement of RentPath’s assets and liabilities at fair value and to reduce depreciation due to internal-use software being reclassified and recognized as an intangible asset upon completion of the acquisition. The estimated useful lives of the intangible assets are as follows:

Estimated useful lives
(in years)
Trade names10 
Application platform3 
Customer relationships10 

l. Adjustment to eliminate RentPath’s interest expense as it was related to debt that was not transferred to us.

m. Adjustment to eliminate RentPath’s other income of $5,895 and $52,037 for the year ended December 31, 2020 and the three months ended March 31, 2021, respectively. These costs consisted primarily of unrealized losses on derivatives and a $52,000 break-up fee received from an affiliate of CoStar Group, Inc. (“CoStar”) during the three months ended March 31, 2021, due to the termination of RentPath’s agreement to be acquired by CoStar. As this transaction would not have occurred if we had acquired RentPath on January 1, 2020, we determined RentPath’s other income balances should be eliminated for pro forma purposes.
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n. Adjustment to eliminate RentPath’s realized gain on cash flow hedges as of December 31, 2020, as the associated interest rate swap contracts related to debt that was not transferred to us.

o. Adjustment to remove $12,988 of deferred tax liabilities not assumed by us and transferred to Wind Down Co. and the addition of $17,743 of deferred tax liabilities resulting from purchase accounting adjustments, in particular, the step up in financial reporting basis of the intangible assets acquired. Our estimate for deferred taxes is preliminary and could be subject to material change based on our further analysis of certain tax attributes acquired and as we finalize other aspects of the allocation of the purchase price for this acquisition. Specifically, we have not completed our evaluation of limitations that exist under current U.S. tax law that may limit or enhance the availability of net operating loss carryforwards acquired in the acquisition of RentPath. If we determine those attributes are realizable, the amount of deferred taxes presented in the historical pro forma financial statements could result in a net deferred tax asset subject to a valuation allowance.

p. Adjustment to reflect a net income tax benefit resulting from adjustments to current state tax expense to account for combined filings and deferred tax expense to 1) remove $12,988 of deferred tax liabilities not assumed by us and transferred to Wind Down Co., 2) adjust valuation allowance with respect to certain tax attributes, and 3) amortization of acquired intangibles as a result of purchase accounting for the period. Our estimate for income tax expense is preliminary and could be subject to material change based on our further analysis of certain tax attributes acquired and as we finalize other aspects of the allocation of the purchase price for this acquisition. Specifically, we have not completed our evaluation of limitations that exist under current U.S. tax law that may limit or enhance the availability of net operating loss carryforwards acquired in the acquisition of RentPath. Upon completion of our analysis of the attributes acquired and their realizability, the amount of income tax benefit presented in the historical pro forma financial statements could materially change. A breakout of the adjustment made is as follows:

Year EndedThree Months Ended
December 31, 2020March 31, 2021
Current income taxes$1,041 $234 
Historical deferred income taxes(4,231)(184)
Pro forma deferred income taxes8,670 2,179 
Total adjustment to benefit (provision) for income taxes$5,480 $2,229 

Note 5: Reclassification Adjustments

Certain reclassification adjustments have been made to the unaudited pro forma combined financial statements to conform RentPath’s historical financial statement presentation to our financial statement presentation. The unaudited pro forma combined balance sheet is presented as of March 31, 2021 and the unaudited pro forma combined consolidated statement of comprehensive income (loss) is presented for the year ended December 31, 2020 and the three months ended March 31, 2021. The reclassification adjustments did not impact total assets, total liabilities, or total shareholders’ equity. There was no impact to net loss for the year ended December 31, 2020 and there was an increase of $1,185 to net loss for the three months ended March 31, 2021. The following reclassification adjustments were made to the unaudited pro forma combined financial statements to conform RentPath’s presentation to our presentation:

q. Adjustment to record RentPath’s prepaid commissions expense to conform to our accounting policies.

r. Reclassification of RentPath’s other noncurrent liabilities to payroll tax liabilities, noncurrent to conform to our balance sheet presentation given the nature of the underlying transactions in the account.

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s. Reclassification of RentPath’s expenses to cost of revenue for a net increase of $13,593 for year ended December 31, 2020 and $3,775 increase for the three months ended March 31, 2021. A breakout of the reclassifications made is as follows:

Year Ended
December 31, 2020		Three Months Ended
March 31, 2021
Cost of revenue to general and administrative$(8)$(1)
Depreciation to cost of revenue1,437 454 
General and administrative to cost of revenue205 51 
Marketing and selling to cost of revenue10,955 2,894 
Depreciation and amortization adjustment of intangible assets to cost of revenue1,004 377 
Net change$13,593 $3,775 

t. Reclassification of RentPath’s costs to technology and development expense for a net increase of $49,914 for the year ended December 31, 2020 and $12,018 increase for the three months ended March 31, 2021. A breakout of the reclassifications made is as follows:

Year Ended
December 31, 2020		Three Months Ended
March 31, 2021
Amortization to technology and development$1,742 $424 
Depreciation to technology and development16,733 3,600 
General and administrative to technology and development10,493 2,692 
Marketing and selling to technology and development9,260 2,308 
Depreciation and amortization adjustment of intangible assets to technology and development11,686 2,994 
Net change$49,914 $12,018 

u. Reclassification of RentPath’s expenses to and from marketing for a net decrease of $64,842 for the year ended December 31, 2020 and $15,290 decrease for the three months ended March 31, 2021. A breakout of the reclassifications made is as follows:

Year Ended
December 31, 2020		Three Months Ended
March 31, 2021
Depreciation to marketing$590 $155 
Marketing to cost of revenue(10,955)(2,894)
Marketing to general and administrative(45,630)(10,372)
Marketing to technology and development(9,260)(2,308)
Depreciation and amortization adjustment of intangible assets to marketing413 129 
Net change$(64,842)$(15,290)
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v. Reclassification of RentPath’s depreciation expense to conform to our income statement presentation. We do not separately present depreciation expense on the statement of comprehensive income (loss). The net decrease of depreciation expense was $34,846 for the fiscal year ended December 31, 2020 and $8,641 for the three months ended March 31, 2021. A breakout of the reclassifications made is as follows:

Year Ended
December 31, 2020		Three Months Ended
March 31, 2021
Depreciation to cost of revenue$(1,438)$(454)
Depreciation to general and administrative(1,756)(509)
Depreciation to marketing(590)(155)
Depreciation to technology and development(16,733)(3,600)
To remove depreciation and amortization adjustment of intangible assets which was allocated to other captions(14,329)(3,923)
Net change$(34,846)$(8,641)

w. Reclassification of RentPath’s amortization of intangible asset to technology and development expense for a net decrease of $1,742 for the year ended December 31, 2020 and $424 decrease for the three months ended March 31, 2021. We do not separately present amortization of intangibles as its statement of comprehensive income (loss).

x. Reclassification of RentPath’s costs to and from general and administrative expense for a net     increase of $37,923 for the year ended December 31, 2020 and $8,562 increase for the three months ended March 31, 2021. A breakout of the reclassifications made is as follows:

Year Ended
December 31, 2020		Three Months Ended
March 31, 2021
Depreciation to general and administrative$1,756 $509 
General and administrative to cost of revenue(205)(51)
General and administrative to technology and development(10,493)(2,692)
Marketing to general and administrative45,630 10,372 
Depreciation and amortization of intangible assets to general and administrative1,235 424 
Net change$37,923 $8,562 

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