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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, 2022
or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___ to ___
Commission file number 001-38160
Redfin Corporation
(Exact name of registrant as specified in its charter)

Delaware
74-3064240
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
1099 Stewart Street
Suite 600
Seattle
WA
98101
(Address of Principal Executive Offices)
(Zip Code)
(206)
576-8610
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 classTrading SymbolName of each exchange on which registered
Common Stock, $0.001 par value per shareRDFNThe Nasdaq Global Select Market

Indicate by check mark whether the registrant (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 108,748,718 shares of common stock outstanding as of October 27, 2022.


Redfin Corporation

Quarterly Report on Form 10-Q
For the Quarter Ended September 30, 2022

Table of Contents
PART I
Page
Item 1.
Item 2.
Item 3.
Item 4.
Item 5.
PART II
Item 1
Item 1A.
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, the 2025 notes, and the 2027 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, 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 to Redfin Mortgage, LLC or Bay Equity LLC, as the context dictates.

Note Regarding Forward-Looking Statements

This quarterly report contains forward-looking statements. All statements contained in this report other than statements of historical fact, including statements regarding our future operating results and financial position, our business strategy and plans, our market growth and trends, and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “could,” “would,” “project,” “plan,” "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, 2021, 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. 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.
i
Table of Contents
PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

Redfin Corporation and Subsidiaries
Consolidated Balance Sheets
(in thousands, except share and per share amounts, unaudited)

September 30, 2022December 31, 2021
Assets
Current assets
Cash and cash equivalents$359,724 $591,003 
Restricted cash43,992 127,278 
Short-term investments110,316 33,737 
Accounts receivable, net of allowances for credit losses of $1,979 and $1,298
96,343 69,594 
Inventory301,231 358,221 
Loans held for sale256,339 35,759 
Prepaid expenses27,361 22,948 
Other current assets26,738 7,524 
Total current assets1,222,044 1,246,064 
Property and equipment, net59,238 58,671 
Right-of-use assets, net45,647 54,200 
Mortgage servicing rights, at fair value36,914 — 
Long-term investments41,677 54,828 
Goodwill461,349 409,382 
Intangible assets, net172,019 185,929 
Other assets, noncurrent12,054 12,898 
Total assets$2,050,942 $2,021,972 
Liabilities, mezzanine equity, and stockholders' equity
Current liabilities
Accounts payable$12,422 $12,546 
Accrued and other liabilities133,885 118,122 
Warehouse credit facilities252,529 33,043 
Secured revolving credit facility202,416 199,781 
Convertible senior notes, net23,393 23,280 
Lease liabilities21,094 15,040 
Total current liabilities645,739 401,812 
Lease liabilities, noncurrent39,803 55,222 
Convertible senior notes, net, noncurrent1,217,768 1,214,017 
Deferred tax liabilities344 1,201 
Total liabilities1,903,654 1,672,252 
Commitments and contingencies (Note 8)
Series A convertible preferred stock—par value $0.001 per share; 10,000,000 shares authorized; 40,000 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively
39,902 39,868 
Stockholders’ equity
Common stock—par value $0.001 per share; 500,000,000 shares authorized; 108,716,990 and 106,308,767 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively
109 106 
Additional paid-in capital739,689 682,084 
Accumulated other comprehensive loss(1,051)(174)
Accumulated deficit(631,361)(372,164)
Total stockholders’ equity107,386 309,852 
Total liabilities, mezzanine equity, and stockholders’ equity$2,050,942 $2,021,972 

See Notes to the consolidated financial statements.
1
Table of Contents
Redfin Corporation and Subsidiaries
Consolidated Statements of Comprehensive Loss
(in thousands, except share and per share amounts, unaudited)

Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Revenue
Service$300,854 $301,657 $862,756 $776,120 
Product299,663 238,417 942,022 503,588 
Total revenue600,517 540,074 1,804,778 1,279,708 
Cost of revenue
Service210,189 174,267 608,884 486,880 
Product332,251 238,505 947,277 497,032 
Total cost of revenue542,440 412,772 1,556,161 983,912 
Gross profit58,077 127,302 248,617 295,796 
Operating expenses
Technology and development48,063 43,658 149,209 112,824 
Marketing33,748 49,143 133,832 116,343 
General and administrative61,005 54,395 191,704 151,352 
Restructuring and reorganization284 — 18,670 — 
Total operating expenses143,100 147,196 493,415 380,519 
Loss from operations(85,023)(19,894)(244,798)(84,723)
Interest income1,174 178 1,948 472 
Interest expense(5,359)(3,672)(12,841)(7,822)
Income tax (expense) benefit(132)311 (425)5,363 
Other (expense) income, net(905)4,128 (3,081)4,099 
Net loss$(90,245)$(18,949)$(259,197)$(82,611)
Non-cash dividends on convertible preferred stock(272)(1,662)(1,416)(5,875)
Net loss attributable to common stock—basic and diluted$(90,517)$(20,611)$(260,613)$(88,486)
Net loss per share attributable to common stock—basic and diluted$(0.83)$(0.20)$(2.42)$(0.85)
Weighted-average shares to compute net loss per share attributable to common stock—basic and diluted108,618,491 105,144,872 107,566,894 104,327,614 
Net loss$(90,245)$(18,949)$(259,197)$(82,611)
Other comprehensive income
Foreign currency translation adjustments27 3 65 3 
Unrealized gain on available-for-sale debt securities34 27 812 161 
Comprehensive loss$(90,184)$(18,919)$(258,320)$(82,447)

See Notes to the consolidated financial statements.

2
Table of Contents
Redfin Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands, unaudited)

Nine Months Ended September 30,
20222021
Operating Activities
Net loss
$(259,197)$(82,611)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization47,438 32,303 
Stock-based compensation51,672 39,438 
Amortization of debt discount and issuance costs4,358 3,583 
Non-cash lease expense11,313 8,510 
Impairment costs913 — 
Net loss on IRLCs, forward sales commitments, and loans held for sale4,228 342 
Change in fair value of mortgage servicing rights, net(1,472)— 
Other3,254 (3,847)
Change in assets and liabilities:
Accounts receivable, net(17,052)(29,487)
Inventory56,990 (385,986)
Prepaid expenses and other assets(2,721)(9,532)
Accounts payable(1,875)616 
Accrued and other liabilities, deferred tax liabilities, and payroll tax liabilities, noncurrent(24,202)23,011 
Lease liabilities (12,435)(9,644)
Origination of mortgage servicing rights (2,774)— 
Proceeds from sale of mortgage servicing rights 1,314 — 
Origination of loans held for sale(3,091,099)(745,703)
Proceeds from sale of loans originated as held for sale3,082,858 744,886 
Net cash used in operating activities(148,489)(414,121)
Investing activities
Purchases of property and equipment(17,496)(20,575)
Purchases of investments(145,273)(129,277)
Sales of investments12,946 98,687 
Maturities of investments66,055 96,303 
Cash paid for acquisition, net of cash, cash equivalents, and restricted cash acquired(97,341)(608,000)
Net cash used in investing activities(181,109)(562,862)
Financing activities
Proceeds from the issuance of common stock pursuant to employee equity plans9,679 14,194 
Tax payments related to net share settlements on restricted stock units(6,650)(21,088)
Borrowings from warehouse credit facilities3,080,606 710,535 
Repayments to warehouse credit facilities(3,069,728)(709,739)
Borrowings from secured revolving credit facility552,051 431,717 
Repayments to secured revolving credit facility(549,416)(256,039)
Proceeds from issuance of convertible senior notes, net of issuance costs— 561,529 
Purchases of capped calls related to convertible senior notes— (62,647)
Payments for repurchases and conversions of convertible senior notes— (2,159)
Other financing payables— 3,161 
Principal payments under finance lease obligations(680)(567)
Cash paid for secured revolving credit facility issuance costs(764)(485)
Net cash provided by financing activities15,098 668,412 
Effect of exchange rate changes on cash, cash equivalents, and restricted cash(65)(3)
Net change in cash, cash equivalents, and restricted cash(314,565)(308,574)
Cash, cash equivalents, and restricted cash:
Beginning of period718,281 945,820 
End of period
$403,716 $637,246 
Supplemental disclosure of cash flow information
Cash paid for interest
$12,887 $5,539 
Non-cash transactions
Stock-based compensation capitalized in property and equipment2,983 2,745 
Property and equipment additions in accounts payable and accrued liabilities28 — 
Leasehold improvements paid directly by lessor77 1,334 
As of September 30,
20222021
Reconciliation of cash, cash equivalents, and restricted cash
Cash and cash equivalents$359,724 $562,714 
Restricted cash43,992 74,532 
Total cash, cash equivalents, and restricted cash$403,716 $637,246 

See Notes to the consolidated financial statements.
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Table of Contents
Redfin Corporation and Subsidiaries
Consolidated Statements of Changes in Mezzanine Equity and Stockholders’ Equity
(in thousands, except share amounts, unaudited)

Series A Convertible Preferred StockCommon StockAdditional Paid-in CapitalAccumulated DeficitAccumulated Other Comprehensive LossTotal Stockholders' Equity
SharesAmountSharesAmount
Balance, June 30, 2022
40,000 $39,891 108,415,939 $108 $723,251 $(541,116)$(990)$181,253 
Issuance of convertible preferred stock, net— 11 — — — — — — 
Issuance of common stock as dividend on convertible preferred stock— — 30,640 — — — — — 
Issuance of common stock pursuant to exercise of stock options— — 50,585 — 344 — — 344 
Issuance of common stock pursuant to settlement of restricted stock units— — 305,603 1 — — — 1 
Common stock surrendered for employees' tax liability upon settlement of restricted stock units— — (85,777)— (2,906)— — (2,906)
Stock-based compensation— — — — 19,000 — — 19,000 
Other comprehensive loss— — — — — — (61)(61)
Net loss— — — — — (90,245)— (90,245)
Balance, September 30, 2022
40,000 $39,902 108,716,990 $109 $739,689 $(631,361)$(1,051)$107,386 
Balance, December 31, 2021
40,000 $39,868 106,308,767 $106 $682,084 $(372,164)$(174)$309,852 
Issuance of convertible preferred stock, net— 34 — — — — — — 
Issuance of common stock as dividend on convertible preferred stock— — 91,920 — — — — — 
Issuance of common stock pursuant to employee stock purchase program— — 661,054 1 4,629 — — 4,630 
Issuance of common stock pursuant to exercise of stock options— — 695,705 1 4,971 — — 4,972 
Issuance of common stock pursuant to settlement of restricted stock units— — 1,362,071 1 (1)— — — 
Common stock surrendered for employees' tax liability upon settlement of restricted stock units— — (402,527)— (6,649)— — (6,649)
Stock-based compensation— — — — 54,655 — — 54,655 
Other comprehensive loss— — — — — — (877)(877)
Net loss— — — — — (259,197)— (259,197)
Balance, September 30, 2022
40,000 $39,902 108,716,990 $109 $739,689 $(631,361)$(1,051)$107,386 

Series A Convertible Preferred StockCommon StockAdditional Paid-in CapitalAccumulated DeficitAccumulated Other Comprehensive Income (Loss)Total Stockholders' Equity
SharesAmountSharesAmount
Balance, June 30, 2021
40,000 $39,846 104,838,095 $105 $651,627 $(326,213)$77 $325,596 
Issuance of convertible preferred stock, net— 11 — — — — — — 
Issuance of common stock as dividend on convertible preferred stock— — 30,640 — — — — — 
Issuance of common stock pursuant to exercise of stock options— — 264,875 — 1,696 — — 1,696 
Issuance of common stock pursuant to settlement of restricted stock units— — 334,283 — — — — — 
Common stock surrendered for employees' tax liability upon settlement of restricted stock units— — (95,122)— (4,558)— — (4,558)
Issuance of common stock in connection with conversion of convertible senior notes— — 3,164 — (10)— — (10)
Stock-based compensation— — — — 14,139 — — 14,139 
Other comprehensive loss— — — — — — (30)(30)
Net loss— — — — — (18,949)— (18,949)
Balance, September 30, 2021
40,000 $39,857 105,375,935 $105 $662,894 $(345,162)$47 $317,884 
Balance, December 31, 2020
40,000 $39,823 103,000,594 $103 $860,556 $(270,313)$211 $590,557 
Issuance of convertible preferred stock, net— 34 — — — — — — 
Issuance of common stock as dividend on convertible preferred stock— — 91,920 — — — — — 
Issuance of common stock pursuant to employee stock purchase program— — 135,426 — 7,299 — — 7,299 
Issuance of common stock pursuant to exercise of stock options— — 1,354,078 1 6,895 — — 6,896 
Issuance of common stock pursuant to settlement of restricted stock units— — 1,072,378 1 (1)— — — 
Common stock surrendered for employees' tax liability upon settlement of restricted stock units— — (319,229)— (21,088)— — (21,088)
Cumulative-effect adjustment from accounting changes — — — — (170,240)7,762 — (162,478)
Purchases of capped calls related to convertible senior notes— — — — (62,647)— — (62,647)
Issuance of common stock in connection with conversion of convertible senior notes— — 40,768 — (63)— — (63)
Stock-based compensation— — — — 42,183 — — 42,183 
Other comprehensive loss— — — — — — (164)(164)
Net loss— — — — — (82,611)— (82,611)
Balance, September 30, 2021
40,000 $39,857 105,375,935 $105 $662,894 $(345,162)$47 $317,884 

See Notes to the consolidated financial statements.
4
Table of Contents
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:
5
Index to Notes to Financial Statements
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, 2021 that is included in this quarterly report is derived from the audited consolidated financial statements and notes for the year ended December 31, 2021 included in Item 8 in our annual report for the year ended December 31, 2021. 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, 2022, our statements of comprehensive loss, and statements of changes in mezzanine equity and stockholders’ equity for the three and nine months ended September 30, 2022 and 2021, as well as our statements of cash flows for the nine months ended September 30, 2022 and 2021. The results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 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 Corporation 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.

Use of Estimates—The preparation of consolidated financial statements, in conformity with GAAP, requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and results of operations during the respective periods. Our estimates include, but are not limited to, valuation of deferred income taxes, stock-based compensation, net realizable value of inventory, capitalization of website and software development costs, the incremental borrowing rate for the determination of the present value of lease payments, recoverability of intangible assets with finite lives, fair value of our mortgage loans held for sale (“LHFS”) and mortgage servicing rights, estimated useful life of intangible assets, fair value of reporting units for purposes of allocating and evaluating goodwill for impairment, and current expected credit losses on certain financial assets. The amounts ultimately realized from the affected assets or ultimately recognized as liabilities will depend on, among other factors, general business conditions and could differ materially in the near term from the carrying amounts reflected in the consolidated financial statements.

Restructuring and Reorganization—Restructuring and reorganization expenses primarily consist of employee termination costs (including severance, retention, benefits, and payroll taxes) associated with the restructuring and reorganization activities from our acquisitions of Bay Equity LLC (“Bay Equity”), our mortgage business, and Rent Group Inc. (“Rent.”), our rentals business, and from our June 2022 workforce reduction. Restructuring and reorganization expenses will also include additional expenses throughout 2022 and into 2023 related to our November 9, 2022 workforce reduction and wind-down of our RedfinNow operations. These expenses are included in restructuring and reorganization in our consolidated statements of comprehensive loss and in accrued and other liabilities in our consolidated balance sheets. See Note 16 to our consolidated financial statements for more information on our November 9, 2022 workforce reduction and wind-down of our RedfinNow operations. We expect to complete our restructuring and reorganization activities by the end of 2023.

Mortgage Servicing Rights (“MSRs”)—We determine the fair value of MSRs using a valuation model that calculates the net present value of estimated future cash flows. Key estimates of future cash flows include prepayment speeds, default rates, discount rates, cost of servicing, objective portfolio characteristics, and others factors. Changes in these estimates could materially change the estimated fair value.

6
Index to Notes to Financial Statements
Lease Impairment—During the third quarter of 2022 we recognized an impairment loss of $913 due to subleasing one of our operating leases.

Recently Adopted Accounting Pronouncements—On October 28, 2021, the Financial Accounting Standards Board issued ASU 2021-08—Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which amends ASC 805 to “require acquiring entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination.” Under current GAAP, an acquirer generally recognizes such items at fair value on the acquisition date. As a result of the amendments made by ASU 2021-08, it is expected that an acquirer will generally recognize and measure acquired contract assets and contract liabilities in a manner consistent with how the acquiree recognized and measured them in its pre-acquisition financial statements. The amendments made by ASU 2021-08 are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted, including in interim periods, for any financial statements that have not yet been issued. We elected to early adopt this standard in the second quarter of 2022, and there was not any material impact on our financial statements as a result of adopting ASU 2021-08.

Recently Issued Accounting Pronouncements—None applicable.

Note 2: Business Combinations

On April 1, 2022, we acquired, for $139,671 in cash, all of the equity interests of Bay Equity, and Bay Equity became one of our wholly owned subsidiaries. We acquired Bay Equity to expand our mortgage business.

The results of operations and the fair values of the assets acquired and liabilities assumed have been included in our consolidated financial statements since the date of acquisition. The revenue from Bay Equity is reported in our mortgage segment in Note 3. The goodwill recognized in connection with our acquisition of Bay Equity is primarily attributable to the anticipated synergies from future growth of the combined business and is not expected to be deductible for tax purposes. We assigned the recognized goodwill of $51,967 to the mortgage segment.
7
Index to Notes to Financial Statements

The following table summarizes the preliminary fair value of assets acquired and liabilities assumed as a result of the Bay Equity acquisition and is subject to revision as more detailed analyses are completed and additional information about the fair value of assets acquired and liabilities assumed becomes available:

Cash and cash equivalents$39,963 
Restricted cash2,367 
Accounts receivable9,697 
Prepaid expenses1,222 
Other current assets19,262 
Property and equipment, net897 
Operating lease right-of-use assets4,995 
Loans held for sale213,891 
Mortgage servicing rights, at fair value33,982 
Other assets, noncurrent294 
Intangible assets14,510 
Goodwill51,967 
Total assets acquired393,047 
Accounts payable1,747 
Accrued and other liabilities38,026 
Lease liabilities2,848 
Lease liabilities and deposits, noncurrent2,147 
Warehouse credit facilities208,608 
Total liabilities assumed253,376 
Total purchase consideration$139,671 

Acquisition-related costs consisted of external fees for advisory, legal, and other professional services and totaled approximately $13 and $2,437 for the three and nine months ended September 30, 2022, respectively. These costs were expensed as incurred and recorded in general and administrative costs in our consolidated statements of comprehensive loss.

Identifiable Intangible Assets—The following table provides the preliminary fair values of the Bay Equity intangible assets, along with their estimated useful lives:

Estimated Fair ValueEstimated Useful Life (in years)
Trade names$11,650 5
Developed technology2,860 3
Total$14,510 

The identifiable intangible assets include trade names and developed technology. Trade names primarily relate to the Bay Equity brand. Developed technology primarily relates to website functionality around data consolidation and optimization which helps drive efficiencies in loan origination and processing. The fair values of trade names and developed technology are derived by applying the relief from royalty method and replacement cost method, respectively. Critical estimates in valuing the intangible assets include revenue growth rate, royalty rate, discount rate, and number of months to recreate the underlying application.

Unaudited Pro Forma Financial Information—The following table presents unaudited pro forma financial information for the three and nine months ended September 30, 2022 and 2021. The pro forma financial information combines our results of operations with that of Bay Equity as though the companies had been combined as of January 1, 2021. The pro forma information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the Bay Equity acquisition had taken place at such time. The pro forma financial information presented below includes adjustments for depreciation and amortization, restructuring costs, and transaction costs:
8
Index to Notes to Financial Statements

Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Revenue$600,126 $621,555 $1,860,255 $1,563,545 
Net loss(90,272)(8,544)(255,832)(41,329)

There were no material non-recurring adjustments made in the pro forma financial information disclosed above.

Note 3: Segment Reporting and Revenue

In its operation of our business, our management, including our chief operating decision maker ("CODM"), who is also our chief executive officer, evaluates the performance of our operating segments based on our statement of operations results, inclusive of net loss. We do not analyze discrete segment balance sheet information related to long-term assets, substantially all of which are located in the United States. We have six operating segments and four reportable segments, real estate services, properties, rentals, and mortgage. As a result of our decision to wind-down RedfinNow operations, we plan to report our properties segment as a discontinued operation beginning with the period during which we complete wind-down of the business.

We generate revenue primarily from commissions and fees charged on each real estate services transaction closed by our lead agents or partner agents, from the sale of RedfinNow homes, from subscription-based product offerings for our rentals business, and from the origination, sales, and servicing of mortgages. Our key revenue components are brokerage revenue, partner revenue, properties revenue, rentals revenue, mortgage revenue, and other revenue.

Information on each of the reportable and other segments and reconciliation to consolidated net loss is presented in the table below. We have assigned certain previously reported expenses to each segment to conform to the way we internally manage and monitor our business. We allocated indirect costs to each segment based on a reasonable allocation methodology, when such costs are significant to the performance measures of the segments.

Three Months Ended September 30, 2022
Real estate servicesPropertiesRentalsMortgageOtherCorporate Overhead and Intercompany EliminationsTotal
Revenue$211,540 $299,663 $38,686 $48,469 $7,079 $(4,920)$600,517 
Cost of revenue156,632 332,251 8,676 43,783 6,018 (4,920)542,440 
Gross profit54,908 (32,588)30,010 4,686 1,061 — 58,077 
Operating expenses
Technology and development25,709 4,728 15,385 985 751 505 48,063 
Marketing18,772 506 12,678 1,653 48