rdfn-20230630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___ to ___

Commission file number 001-38160


Redfin Corporation

(Exact name of registrant as specified in its charter)

Delaware

74-3064240

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

1099 Stewart Street

Suite 600

Seattle

98101

(Address of Principal Executive Offices)

(Zip Code)


(206)			576-8333
Registrant's telephone number, including area code



(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.001 par value per share	RDFN	The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

☒

Yes

☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

☒

Yes

☐

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


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐

Yes

☒

The registrant had 113,975,191 shares of common stock outstanding as of July 28, 2023.

Redfin Corporation

Quarterly Report on Form 10-Q

For the Quarter Ended June 30, 2023

Table of Contents



PART I		Page

Item 1.	Financial Statements (unaudited)	1
	Consolidated Balance Sheets	1
	Consolidated Statements of Comprehensive Loss	2
	Consolidated Statements of Cash Flows	3
	Consolidated Statements of Changes in Mezzanine Equity and Stockholders’ Equity	4
	Index to Notes to Consolidated Financial Statements	5
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	50
Item 4.	Controls and Procedures	50

PART II

Item 1	Legal Proceedings	52
Item 1A.	Risk Factors	52
Item 5.	Other Information	52
Item 6.	Exhibits	53

	Signatures	54

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, and (ii) 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, 2022, as supplemented by Part II, Item 1A of this report. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the effect of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the future events and trends discussed in this report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Accordingly, you should not rely on forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, performance, or events and circumstances reflected in the forward-looking statements will be achieved or occur. We undertake no obligation to update any of these forward-looking statements for any reason after the date of this report or to conform these statements to actual results or revised expectations.

Note Regarding Industry and Market Data

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

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

Redfin Corporation and Subsidiaries

Consolidated Balance Sheets

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


	June 30, 2023		December 31, 2022
Assets
Current assets
Cash and cash equivalents	$	118,776	$	232,200
Restricted cash	2,377		2,406
Short-term investments	100,643		122,259
Accounts receivable, net of allowances for credit losses of $2,206 and $2,223	67,753		46,375
Loans held for sale	233,550		199,604
Prepaid expenses	26,042		34,006
Other current assets	9,979		7,449
Current assets of discontinued operations	1,378		132,159
Total current assets	560,498		776,458
Property and equipment, net	49,241		54,939
Right-of-use assets, net	37,270		40,889
Mortgage servicing rights, at fair value	35,503		36,261
Long-term investments	5,473		29,480
Goodwill	461,349		461,349
Intangible assets, net	142,778		162,272
Other assets, noncurrent	11,493		11,247
Noncurrent assets of discontinued operations	—		1,309
Total assets	$	1,303,605	$	1,574,204
Liabilities, mezzanine equity, and stockholders' equity
Current liabilities
Accounts payable	$	14,661	$	11,065
Accrued and other liabilities	102,568		106,763
Warehouse credit facilities	227,801		190,509
Convertible senior notes, net	23,506		23,431
Lease liabilities	16,234		18,560
Current liabilities of discontinued operations	44		4,311
Total current liabilities	384,814		354,639
Lease liabilities, noncurrent	34,383		36,906
Convertible senior notes, net, noncurrent	834,716		1,078,157

Deferred tax liabilities	255		243
Noncurrent liabilities of discontinued operations	—		392
Total liabilities	1,254,168		1,470,337
Commitments and contingencies (Note 7)
Series A convertible preferred stock—par value $0.001 per share; 10,000,000 shares authorized; 40,000 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively	39,936		39,914
Stockholders’ equity
Common stock—par value $0.001 per share; 500,000,000 shares authorized; 113,934,673 and 109,696,178 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively	114		110
Additional paid-in capital	791,302		757,951
Accumulated other comprehensive loss	(452)		(801)
Accumulated deficit	(781,463)		(693,307)
Total stockholders’ equity	9,501		63,953
Total liabilities, mezzanine equity, and stockholders’ equity	$	1,303,605	$	1,574,204

See Notes to the consolidated financial statements.

Table of Contents

Redfin Corporation and Subsidiaries

Consolidated Statements of Comprehensive Loss

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Revenue	$	275,556	$	349,049	$	489,639	$	571,865
Cost of revenue	175,366		237,813		331,311		408,980
Gross profit	100,190		111,236		158,328		162,885
Operating expenses
Technology and development	47,141		46,822		94,804		92,343
Marketing	33,033		55,922		73,436		98,111
General and administrative	61,765		68,523		131,204		124,664
Restructuring and reorganization	6,106		12,406		7,159		18,115
Total operating expenses	148,045		183,673		306,603		333,233
Loss from continuing operations	(47,855)		(72,437)		(148,275)		(170,348)
Interest income	2,704		554		6,110		774
Interest expense	(1,766)		(2,217)		(3,688)		(4,429)
Income tax expense	(233)		(159)		(643)		(293)
Gain on extinguishment of convertible senior notes	20,083		—		62,353		—
Other expense, net	(145)		(264)		(379)		(2,175)
Net loss from continuing operations	(27,212)		(74,523)		(84,522)		(176,471)
Net (loss) income from discontinued operations	(146)		(3,623)		(3,634)		7,519
Net loss	$	(27,358)	$	(78,146)	$	(88,156)	$	(168,952)

Net loss from continuing operations	$	(27,212)	$	(74,523)	$	(84,522)	$	(176,471)
Dividends on convertible preferred stock	(297)		(350)		(523)		(1,144)

Net loss from continuing operations attributable to common stock—basic and diluted	$	(27,509)	$	(74,873)	$	(85,045)	$	(177,615)
Net loss from continuing operations per share attributable to common stock—basic and diluted	$	(0.25)	$	(0.70)	$	(0.77)	$	(1.66)
Weighted-average shares to compute net loss per share attributable to common stock—basic and diluted	111,678,417		107,396,575		110,895,358		107,032,381
Net loss attributable to common stock—basic and diluted	$	(27,655)	$	(78,496)	$	(88,679)	$	(170,096)
Net loss attributable to common stock per share—basic and diluted	$	(0.25)	$	(0.73)	$	(0.80)	$	(1.59)



Net loss	$	(27,358)	$	(78,146)	$	(88,156)	$	(168,952)
Other comprehensive (loss) income
Foreign currency translation adjustments	—		34		(58)		38
Unrealized (loss) gain on available-for-sale debt securities	(17)		217		407		778
Comprehensive loss	$	(27,375)	$	(77,895)	$	(87,807)	$	(168,136)

See Notes to the consolidated financial statements.

Table of Contents

Redfin Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(in thousands, unaudited)


	Six Months Ended June 30,
	2023		2022
Operating Activities
Net loss	$	(88,156)	$	(168,952)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	34,146		31,140
Stock-based compensation	36,582		33,601
Amortization of debt discount and issuance costs	2,029		2,899
Non-cash lease expense	9,578		7,096
Impairment costs	113		—
Net (gain) loss on IRLCs, forward sales commitments, and loans held for sale	(4,565)		2,721
Change in fair value of mortgage servicing rights, net	599		(878)
Gain on extinguishment of convertible senior notes	(62,353)		—
Other	(1,794)		3,170
Change in assets and liabilities:
Accounts receivable, net	(14,069)		(6,791)
Inventory	114,232		(19,297)
Prepaid expenses and other assets	8,868		(2,852)
Accounts payable	2,812		5,964
Accrued and other liabilities, deferred tax liabilities, and payroll tax liabilities, noncurrent	(4,522)		5,529
Lease liabilities	(10,790)		(8,042)
Origination of mortgage servicing rights	(579)		(964)
Proceeds from sale of mortgage servicing rights	738		774
Origination of loans held for sale	(1,922,690)		(1,641,377)
Proceeds from sale of loans originated as held for sale	1,888,706		1,587,759
Net cash used in operating activities	(11,115)		(168,500)
Investing activities
Purchases of property and equipment	(6,213)		(12,131)
Purchases of investments	(76,866)		(82,184)
Sales of investments	65,099		12,946
Maturities of investments	59,383		19,425
Cash paid for acquisition, net of cash, cash equivalents, and restricted cash acquired	—		(97,341)
Net cash provided by (used in) investing activities	41,403		(159,285)
Financing activities


Proceeds from the issuance of common stock pursuant to employee equity plans	5,665		9,258
Tax payments related to net share settlements on restricted stock units	(11,096)		(3,743)
Borrowings from warehouse credit facilities	1,920,487		1,628,684
Repayments to warehouse credit facilities	(1,883,196)		(1,572,033)
Borrowings from secured revolving credit facility	—		326,025
Repayments to secured revolving credit facility	—		(369,266)
Cash paid for secured revolving credit facility issuance costs	—		(764)



Principal payments under finance lease obligations	(53)		(414)
Repurchases of convertible senior notes	(183,019)		—


Net cash (used in) provided by financing activities	(151,212)		17,747
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(58)		(42)
Net change in cash, cash equivalents, and restricted cash	(120,982)		(310,080)
Cash, cash equivalents, and restricted cash:
Beginning of period(1)	242,246		718,281
End of period(2)	$	121,264	$	408,201

Supplemental disclosure of cash flow information
Cash paid for interest	$	8,370	$	6,581
Non-cash transactions
Stock-based compensation capitalized in property and equipment	2,204		2,053
Property and equipment additions in accounts payable and accrued liabilities	64		69

(1) Cash, cash equivalents, and restricted cash consisted of the following (beginning of period):


	As of December 31,
	2022		2021
Continuing operations
Cash and cash equivalents	$	232,200	$	571,384
Restricted cash	2,406		5,244
Total	234,606		576,628
Discontinued operations
Cash and cash equivalents	7,640		19,619
Restricted cash	—		122,034
Total	7,640		141,653
Total cash, cash equivalents, and restricted cash	$	242,246	$	718,281

(2) Cash, cash equivalents, and restricted cash consisted of the following (end of period):


	As of June 30,
	2023		2022
Continuing operations
Cash and cash equivalents	$	118,776	$	356,510
Restricted cash	2,377		5,771
Total	121,153		362,281
Discontinued operations
Cash and cash equivalents	111		23,412
Restricted cash	—		22,508
Total	111		45,920
Total cash, cash equivalents, and restricted cash	$	121,264	$	408,201

See Notes to the consolidated financial statements.

Table of Contents

Redfin Corporation and Subsidiaries

Consolidated Statements of Changes in Mezzanine Equity and Stockholders’ Equity

(in thousands, except share amounts, unaudited)


	Series A Convertible Preferred Stock			Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders' Equity
	Shares	Amount		Shares	Amount
Balance, March 31, 2023	40,000	$	39,925	110,526,884	$	110	$	775,094	$	(754,105)	$	(435)	$	20,664
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 employee stock purchase program	—	—		1,150,703	1		4,214		—		—		4,215
Issuance of common stock pursuant to exercise of stock options	—	—		545,127	2		1,310		—		—		1,312
Issuance of common stock pursuant to settlement of restricted stock units	—	—		2,412,813	2		(2)		—		—		—
Common stock surrendered for employees' tax liability upon settlement of restricted stock units	—	—		(731,494)	(1)		(7,936)		—		—		(7,937)


Stock-based compensation	—	—		—	—		18,622		—		—		18,622
Other comprehensive loss	—	—		—	—		—		—		(17)		(17)
Net loss	—	—		—	—		—		(27,358)		—		(27,358)
Balance, June 30, 2023	40,000	$	39,936	113,934,673	$	114	$	791,302	$	(781,463)	$	(452)	$	9,501

Balance, December 31, 2022	40,000	$	39,914	109,696,178	$	110	$	757,951	$	(693,307)	$	(801)	$	63,953
Issuance of convertible preferred stock, net	—	22		—	—		—		—		—		—
Issuance of common stock as dividend on convertible preferred stock	—	—		61,280	—		—		—		—		—
Issuance of common stock pursuant to employee stock purchase program	—	—		1,150,703	1		4,214		—		—		4,215
Issuance of common stock pursuant to exercise of stock options	—	—		563,164	—		1,450		—		—		1,450
Issuance of common stock pursuant to settlement of restricted stock units	—	—		3,568,639	4		(4)		—		—		—
Common stock surrendered for employees' tax liability upon settlement of restricted stock units	—	—		(1,105,291)	(1)		(11,095)		—		—		(11,096)

Stock-based compensation	—	—		—	—		38,786		—		—		38,786
Other comprehensive income	—	—		—	—		—		—		349		349
Net loss	—	—		—	—		—		(88,156)		—		(88,156)
Balance, June 30, 2023	40,000	$	39,936	113,934,673	$	114	$	791,302	$	(781,463)	$	(452)	$	9,501


	Series A Convertible Preferred Stock			Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders' Equity
	Shares	Amount		Shares	Amount
Balance, March 31, 2022	40,000	$	39,879	107,025,691	$	107	$	699,225	$	(462,970)	$	(739)	$	235,623
Issuance of convertible preferred stock, net	—	12		—	—		—		—		—		—
Issuance of common stock as dividend on convertible preferred stock	—	—		30,640	—		—		—		—		—
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	—	—		436,621	—		2,813		—		—		2,813
Issuance of common stock pursuant to settlement of restricted stock units	—	—		372,111	—		—		—		—		—
Common stock surrendered for employees' tax liability upon settlement of restricted stock units	—	—		(110,178)	—		(1,148)		—		—		(1,148)


Stock-based compensation	—	—		—	—		17,732		—		—		17,732
Other comprehensive loss	—	—		—	—		—		—		(251)		(251)
Net loss	—	—		—	—		—		(78,146)		—		(78,146)
Balance, June 30, 2022	40,000	$	39,891	108,415,939	$	108	$	723,251	$	(541,116)	$	(990)	$	181,253

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	—	23		—	—		—		—		—		—
Issuance of common stock as dividend on convertible preferred stock	—	—		61,280	—		—		—		—		—
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	—	—		645,120	—		4,628		—		—		4,628
Issuance of common stock pursuant to settlement of restricted stock units	—	—		1,056,468	1		(1)		—		—		—
Common stock surrendered for employees' tax liability upon settlement of restricted stock units	—	—		(316,750)	—		(3,743)		—		—		(3,743)

Stock-based compensation	—	—		—	—		35,654		—		—		35,654
Other comprehensive loss	—	—		—	—		—		—		(816)		(816)
Net loss	—	—		—	—		—		(168,952)		—		(168,952)
Balance, June 30, 2022	40,000	$	39,891	108,415,939	$	108	$	723,251	$	(541,116)	$	(990)	$	181,253

See Notes to the consolidated financial statements.

Table of Contents

Index to Notes to Consolidated Financial Statements


Note 1:	Summary of Accounting Policies	6
Note 2:	Discontinued Operations	7
Note 3:	Segment Reporting and Revenue	9
Note 4:	Financial Instruments	11
Note 5:	Property and Equipment	15
Note 6:	Leases	16
Note 7:	Commitments and Contingencies	17
Note 8:	Acquired Intangible Assets and Goodwill	18
Note 9:	Accrued and Other Liabilities	18
Note 10:	Mezzanine Equity	19
Note 11:	Equity and Equity Compensation Plans	20
Note 12:	Net Loss per Share Attributable to Common Stock	22
Note 13:	Income Taxes	23
Note 14:	Debt	24

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, 2022 that is included in this quarterly report is derived from the audited consolidated financial statements and notes for the year ended December 31, 2022 included in Item 8 in our annual report for the year ended December 31, 2022. 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 June 30, 2023, our statements of comprehensive loss, and statements of changes in mezzanine equity and stockholders’ equity for the three and six months ended June 30, 2023 and 2022, as well as our statements of cash flows for the six months ended June 30, 2023 and 2022. The results for the three and six months ended June 30, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023 or for any interim period or for any other future year.

We completed the wind-down of our properties segment as of June 30, 2023, at which time it met the criteria for discontinued operations in our consolidated financial statements. As a result, certain amounts presented in prior period consolidated balance sheets and statements of comprehensive loss have been reclassified to conform to the current period financial statement presentation. The changes do not affect previously reported consolidated net loss or previously reported total assets, liabilities, or stockholders’ equity on our consolidated balance sheets. See Note 2 for additional information.

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, 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.

Recently Adopted Accounting Pronouncements—None applicable.

Recently Issued Accounting Pronouncements—None applicable.

Index to Notes to Financial Statements

Note 2: Discontinued Operations

In November 2022, our management and board of directors made the decision to wind down RedfinNow. The financial results of RedfinNow have historically been included in our properties segment. Winding-down RedfinNow was a strategic decision we made in order to focus our resources on our core businesses in the face of the rising cost of capital. The wind-down of our properties segment was complete as of June 30, 2023, at which time it met the criteria for discontinued operations in our consolidated financial statements.

The major classes of assets and liabilities of our discontinued operations were as follows:


	June 30, 2023		December 31, 2022
Assets
Current assets
Cash and cash equivalents	$	111	$	7,640

Accounts receivable, net	1,195		8,504
Inventory	—		114,232
Prepaid expenses	7		500
Other current assets	65		1,283
Total current assets of discontinued operations	1,378		132,159
Property and equipment, net	—		167
Right-of-use assets, net	—		1,142
Total assets of discontinued operations	$	1,378	$	133,468
Liabilities
Current liabilities
Accounts payable	$	6	$	754
Accrued and other liabilities	38		2,980
Lease liabilities	—		577
Total current liabilities of discontinued operations	44		4,311
Lease liabilities, noncurrent	—		392
Total liabilities of discontinued operations	$	44	$	4,703

Index to Notes to Financial Statements

The major classes of line items of the discontinued operations included in our consolidated statement of comprehensive loss were as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Revenue	$	10,998	$	257,866	$	122,576	$	632,396
Cost of revenue(1)	10,913		251,100		124,422		604,741
Gross profit (loss)	85		6,766		(1,846)		27,655
Operating expenses
Technology and development(1)	23		4,684		552		8,803
Marketing(1)	18		821		523		1,974
General and administrative(1)	115		3,209		638		6,035
Restructuring and reorganization	75		271		75		271
Total operating expenses	231		8,985		1,788		17,083
(Loss) income from discontinued operations	(146)		(2,219)		(3,634)		10,572

Interest expense	—		(1,403)		—		(3,052)

Other expense, net	—		(1)		—		(1)
Net (loss) income from discontinued operations	$	(146)	$	(3,623)	$	(3,634)	$	7,519

Net (loss) income from discontinued operations per share—basic and diluted	$	0.00	$	(0.03)	$	(0.03)	$	0.07

(1) Includes stock-based compensation as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

	(in thousands)

Cost of revenue	$	1	$	265	$	46	$	651
Technology and development	4		933		86		1,788
Marketing	1		30		19		59
General and administrative	25		299		83		566
Total stock-based compensation	$	31	$	1,527	$	234	$	3,064

Significant non-cash items and capital expenditures of the discontinued operations were as follows:


	Six Months Ended June 30,
	2023		2022
Amortization of debt discount and debt issuance costs	$	—	$	301
Stock-based compensation	234		3,064
Depreciation and amortization	89		1,142
Capital expenditures	—		765
Cash paid for interest	—		2,751

Index to Notes to Financial Statements

Charges specifically relating to the wind-down of our properties segment were as follows:


Cost type	Financial statement line item	Six Months Ended June 30, 2023		Cumulative amount recognized
Employee termination costs	Restructuring and reorganization	$	539	$	8,587
Asset write-offs	Restructuring and reorganization	—		493
Other	Restructuring and reorganization	(465)		(890)
Acceleration of debt issuance costs	Interest expense	—		481
Total		$	74	$	8,671

Restructuring and reorganization charges related to our continuing operations 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 and April 2023 workforce reductions. These expenses are included in restructuring and reorganization in our consolidated statements of comprehensive loss and in accrued and other liabilities on our consolidated balance sheets.

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 revenue and gross profit. 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 five operating segments and three reportable segments, real estate services, rentals, and mortgage. As a result of our decision to wind-down RedfinNow operations in November 2022, we report our properties segment as a discontinued operation as we completed wind-down of the business during the three months ended June 30, 2023.

We generate revenue primarily from commissions and fees charged on each real estate services transaction closed by our lead agents or partner agents, 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, rentals revenue, mortgage revenue, and other revenue.

Index to Notes to Financial Statements

Information on each of our reportable and other segments and reconciliation to net (loss) income from continuing operations is presented in the tables 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 June 30, 2023
	Real estate services		Rentals		Mortgage		Other		Corporate overhead		Total
Revenue(1)	$	180,641	$	45,356	$	38,426	$	11,133	$	—	$	275,556
Cost of revenue	124,447		10,427		34,266		6,226		—		175,366
Gross profit	56,194		34,929		4,160		4,907		—		100,190
Operating expenses
Technology and development	28,044		16,304		734		1,118		941		47,141
Marketing	16,004		15,938		1,054		16		21		33,033
General and administrative	20,961		25,305		6,724		1,044		7,731		61,765
Restructuring and reorganization	—		—		—		—		6,106		6,106
Total operating expenses	65,009		57,547		8,512		2,178		14,799		148,045
(Loss) income from continuing operations	(8,815)		(22,618)		(4,352)		2,729		(14,799)		(47,855)
Interest income, interest expense, income tax expense, gain on extinguishment of convertible senior notes, and other expense, net	—		28		(91)		153		20,553		20,643
Net (loss) income from continuing operations	$	(8,815)	$	(22,590)	$	(4,443)	$	2,882	$	5,754	$	(27,212)

(1) Included in revenue is $95 from providing services to our discontinued properties segment.


	Three Months Ended June 30, 2022
	Real estate services		Rentals		Mortgage		Other		Corporate overhead		Total
Revenue(1)	$	251,809	$	38,248	$	53,098	$	5,894	$	—	$	349,049
Cost of revenue	177,698		7,901		46,316		5,898		—		237,813
Gross profit	74,111		30,347		6,782		(4)		—		111,236
Operating expenses
Technology and development	27,696		14,871		1,904		1,189		1,162		46,822
Marketing	40,765		13,086		1,843		71		157		55,922
General and administrative	24,341		21,824		9,450		850		12,058		68,523
Restructuring and reorganization	—		—		—		—		12,406		12,406
Total operating expenses	92,802		49,781		13,197		2,110		25,783		183,673
Loss from continuing operations	(18,691)		(19,434)		(6,415)		(2,114)		(25,783)		(72,437)
Interest income, interest expense, income tax expense, and other expense, net	(123)		232		(35)		11		(2,171)		(2,086)
Net loss from continuing operations	$	(18,814)	$	(19,202)	$	(6,450)	$	(2,103)	$	(27,954)	$	(74,523)

(1) Included in revenue is $4,740 from providing services to our discontinued properties segment.

Index to Notes to Financial Statements


	Six Months Ended June 30, 2023
	Real estate services		Rentals		Mortgage		Other		Corporate overhead		Total
Revenue(1)	$	307,937	$	88,226	$	74,915	$	18,561	$	—	$	489,639
Cost of revenue	235,941		20,192		63,479		11,699		—		331,311
Gross profit	71,996		68,034		11,436		6,862		—		158,328
Operating expenses
Technology and development	56,939		32,268		1,377		2,342		1,878		94,804
Marketing	41,064		30,264		2,034		26		48		73,436
General and administrative	40,579		51,607		13,653		2,097		23,268		131,204
Restructuring and reorganization	—		—		—		—		7,159		7,159
Total operating expenses	138,582		114,139		17,064		4,465		32,353		306,603
(Loss) income from continuing operations	(66,586)		(46,105)		(5,628)		2,397		(32,353)		(148,275)
Interest income, interest expense, income tax expense, gain on extinguishment of convertible senior notes, and other expense, net	—		73		(151)		268		63,563		63,753
Net (loss) income from continuing operations	$	(66,586)	$	(46,032)	$	(5,779)	$	2,665	$	31,210	$	(84,522)

(1) Included in revenue is $1,244 from providing services to our discontinued properties segment.


	Six Months Ended June 30, 2022
	Real estate services		Rentals		Mortgage		Other		Corporate overhead		Total
Revenue(1)	$	429,295	$	76,292	$	56,015	$	10,263	$	—	$	571,865
Cost of revenue	331,482		15,094		51,834		10,570		—		408,980
Gross profit	97,813		61,198		4,181		(307)		—		162,885
Operating expenses
Technology and development	54,435		29,154		4,251		2,225		2,278		92,343
Marketing	71,608		24,128		1,871		125		379		98,111
General and administrative	47,333		46,015		10,974		1,562		18,780		124,664
Restructuring and reorganization	—		—		—		—		18,115