Press Release

Redfin Reports Third Quarter 2020 Financial Results

November 05, 2020

SEATTLE, Nov. 5, 2020 /PRNewswire/ -- Redfin Corporation (NASDAQ: RDFN) today announced financial results for the third quarter ended September 30, 2020. All financial measures, unless otherwise noted, are presented on a GAAP basis and include stock-based compensation, depreciation and amortization, and expenses related to actions taken in response to COVID-19.

Revenue decreased 1% year-over-year to $237 million during the third quarter. Gross profit was $93 million, an increase of 74% from $53 million in the third quarter of 2019. Real estate services gross profit was $92 million, an increase of 70% from $54 million in the third quarter of 2019. Real estate services gross margin was 44%, compared to 35% in the third quarter of 2019. Operating expenses were $56 million, an increase of 22% from $46 million in the third quarter of 2019. Operating expenses were 24% of revenue, up from 19% in the third quarter of 2019.

Net income was $34.2 million, compared to net income of $6.8 million in the third quarter of 2019. Dividend on our convertible preferred stock was $1.5 million in the third quarter. Net income attributable to common stock was $32.0 million. Stock-based compensation was $11.3 million, up from $7.5 million in the third quarter of 2019. Depreciation and amortization was $3.7 million, up from $2.6 million in the third quarter of 2019. Interest income was $0.3 million and interest expense was $2.5 million, compared to $1.6 million and $2.3 million, respectively, in the third quarter of 2019. Direct and incremental costs related to COVID-19 were $0.3 million and are included in general and administrative expenses.

Net income per share attributable to common stock, diluted, was $0.30, compared to net income per share, diluted, of $0.07 in the third quarter of 2019.

"Redfin's increasing share of North America's online real estate audience, coupled with a strong housing market, has generated demand faster than we can recruit agents, lenders and partners," said Redfin CEO Glenn Kelman. "Our market share gains have resumed, and seem to be accelerating. Our mortgage business generated its first quarterly gross profits. It has taken us more than a decade to build the technology and the vast network of local agents to let people tour almost any home for sale in almost any town in America, virtually or in person. This capability was a convenience for people still likely to use a traditional agent for a cross-town move. But for the millions of Americans now free to move anywhere in the country, that little Redfin touring button on their cell-phone screen has become the passport to a new life."

Third Quarter Highlights

  • Reached market share of 1.04% of U.S. existing home sales by value in the third quarter of 2020, an increase of .08 percentage points from the third quarter of 2019.(1)
  • Saved homebuyers and sellers over $61 million in the third quarter of 2020. This includes the savings Redfin offers buyers through the Redfin Refund and sellers through Redfin's lower listing fee when compared to a 2.5% listing commission.
  • Grew visitors to our website and mobile application by 38% compared to the third quarter of 2019.
  • Kicked off a massive hiring effort to meet surging consumer demand and welcomed over 400 new employees to Redfin in the third quarter.
  • Conducted nearly 21,000 video tours. Even as the majority of Redfin consumers have resumed in-person touring, approximately 9% of third quarter tour requests were for video tours, a sign Redfin's virtual brokerage capabilities will be a long-term competitive advantage even after the pandemic subsides.
  • Launched RedfinNow in Palm Springs. The company has now resumed RedfinNow offers in 11 of 13 markets and has continued to expand to additional markets in the fourth quarter.
  • Created a new Home Sale Advisor role to better help customers navigate their home selling options at Redfin, whether they choose to list on the market with a local Redfin agent or sell directly to RedfinNow.
  • Increased the percentage of Redfin employees who are people of color from 31% in June to 32% in September.
  • Appointed Kerry D. Chandler, an experienced HR executive, to the Redfin Board of Directors.

(1) We calculate the aggregate value of U.S. home sales by multiplying the total number of U.S. existing home sales by the mean sale price of these homes, each as reported by the National Association of REALTORS®. We calculate our market share by aggregating the home value of brokerage and partner real estate services transactions. Then, in order to account for both the sell- and buy-side components of each transaction, we divide that value by two-times the estimated aggregate value of U.S. home sales.

Business Outlook
The following forward-looking statements reflect Redfin's expectations as of November 5, 2020, and are subject to substantial uncertainty.

For the fourth quarter of 2020 we expect:

  • Total revenue between $226 million and $233 million, representing a year-over-year decrease between 3% and 0% compared to the fourth quarter of 2019. Properties segment revenue between $31 million and $34 million is included in the guidance provided.
  • Net income between $2 million and $5 million, compared to net loss of $7.8 million in the fourth quarter of 2019. This guidance includes approximately $10.5 million of expected stock-based compensation, $4.2 million of expected depreciation and amortization, and $7.5 million of expected interest expense associated with our convertible senior notes and other credit obligations. This guidance also includes approximately $8.1 million of an expected one-time, non-cash expense associated with the repurchase of a portion of our convertible senior notes due 2023. Net income attributable to common stock will include the value of dividend on our convertible preferred stock, which we expect to pay in shares of our common stock.

Conference Call
Redfin will webcast a conference call to discuss the results at 1:30 p.m. Pacific Time today. The webcast will be open to the public at http://investors.redfin.com. The webcast will remain available on the investor relations website for at least three months following the conference call.

Forward-Looking Statements
This press release contains forward-looking statements within the meaning of federal securities laws, including our future operating results, as described under Business Outlook. We believe our expectations related to these forward-looking statements are reasonable, but actual results may turn out to be materially different. For factors that could cause actual results to differ materially from the forward-looking statements in this press release, please see the risks and uncertainties identified under the heading "Risk Factors" in our annual report for the year ended December 31, 2019, as supplemented by our quarterly report for the quarter ended September 30, 2020, both of which are available on our Investor Relations website at http://investors.redfin.com and on the SEC website at www.sec.gov. All forward-looking statements reflect our beliefs and assumptions only as of the date of this press release. We undertake no obligation to update forward-looking statements to reflect future events or circumstances.

About Redfin
Redfin is a technology-powered residential real estate company, redefining real estate in the consumer's favor in a commission-driven industry. We do this by integrating every step of the home buying and selling process and pairing our own agents with our own technology, creating a service that is faster, better and costs less. We offer brokerage, iBuying, mortgage, and title services, and we also run the country's #1 real estate brokerage search site, offering a host of online tools to consumers, including the Redfin Estimate. We represent people buying and selling homes in over 90 markets in the United States and Canada. Since our launch in 2006, we have saved our customers over $800 million and we've helped them buy or sell more than 235,000 homes worth more than $115 billion.

Redfin may post updates about COVID-19's impact on the U.S. residential real estate industry or its business on its company blog at www.redfin.com/blog/real-estate-news/. We encourage investors and others interested in our company to review and subscribe to the information we post on our company blog, as some of the information may be material.

Redfin-F

 

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, 2020


2020


2019


2020


2019

Revenue








Service

$

217,280



$

158,519



$

469,893



$

405,160


Product

19,636



80,164



171,683



141,445


Total revenue

236,916



238,683



641,576



546,605


Cost of revenue(1)








Service

122,583



104,397



314,842



297,320


Product

21,261



80,909



174,744



144,807


Total cost of revenue

143,844



185,306



489,586



442,127


Gross profit

93,072



53,377



151,990



104,478


Operating expenses








Technology and development(1)

22,452



18,801



60,687



50,421


Marketing(1)

12,421



8,361



47,611



68,611


General and administrative(1)(2)

21,190



18,779



68,539



57,881


Total operating expenses

56,063



45,941



176,837



176,913


Income (loss) from operations

37,009



7,436



(24,847)



(72,435)


Interest income

319



1,576



1,859



5,804


Interest expense

(2,522)



(2,274)



(7,631)



(6,564)


Other income (expense), net

(640)



44



(1,943)



172


Net income (loss)

$

34,166



$

6,782



$

(32,562)



$

(73,023)


Dividend on convertible preferred stock

(1,530)





(2,814)




Undistributed earnings attributable to participating securities

(653)








Net income (loss) attributable to common stock—basic and diluted

$

31,983



$

6,782



$

(35,376)



$

(73,023)


Net income (loss) per share attributable to common stock—basic

$

0.32



$

0.07



$

(0.36)



$

(0.80)


Weighted average shares of common stock—basic

99,840,144



91,994,731



97,365,122



91,279,086


Net income (loss) per share attributable to common stock—diluted

0.30



0.07



(0.36)



(0.80)


Weighted average shares of common stock—diluted

107,607,711



97,171,270



97,365,122



91,279,086


.............................................................................




.




Other comprehensive income (loss)








Net income (loss)

$

34,166



$

6,782



$

(32,562)



$

(73,023)


Foreign currency translation adjustments

6



(10)



(16)



28


Unrealized gain (loss) on available-for-sale securities

(139)



(8)



282



(2)


Total comprehensive income (loss)

$

34,033



$

6,764



$

(32,296)



$

(72,997)



(1) Includes stock-based compensation as follows:

 


Three Months Ended September 30,


Nine Months Ended September 30,


2020


2019


2020


2019

Cost of revenue

$

2,574



$

1,605



$

5,981



$

4,398


Technology and development

4,964



3,320



11,736



8,661


Marketing

403



390



1,130



1,025


General and administrative

3,407



2,195



6,917



5,708


Total

$

11,348



$

7,510



$

25,764



$

19,792



(2) Includes direct and incremental costs related to COVID-19 of $321 and $7,846, which are partially offset by $56 and $1,348 in employee retention credits allowed under the CARES Act, for the three and nine months ended September 30, 2020, respectively.

 

Redfin Corporation and Subsidiaries

Consolidated Balance Sheets

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



September 30, 2020


December 31, 2019

Assets




Current assets




Cash and cash equivalents

$

371,573



$

234,679


Restricted cash

16,393



12,769


Short-term investments

129,809



70,029


Accounts receivable, net

41,085



19,223


Inventory

24,993



74,590


Loans held for sale

41,921



21,985


Prepaid expenses

7,698



14,822


Other current assets

5,189



3,496


Total current assets

638,661



451,593


Property and equipment, net

42,210



39,577


Right-of-use assets, net

45,392



52,004


Long-term investments

17,072



30,978


Goodwill and intangibles, net

11,138



11,504


Other non-current assets

8,776



10,557


Total assets

$

763,249



$

596,213


Liabilities, mezzanine equity and stockholders' equity




Current liabilities




Accounts payable

$

3,375



$

2,122


Accrued liabilities

57,517



38,022


Other payables

10,550



7,884


Warehouse credit facilities

40,308



21,302


Secured revolving credit facility

14,923



4,444


Convertible senior notes, net

124,495




Current lease liabilities

11,682



11,408


Total current liabilities

262,850



85,182


Non-current lease liabilities and deposits

51,597



59,869


Convertible senior notes, net



119,716


Non-current payroll tax liabilities

8,711




Total liabilities

323,158



264,767


Commitments and contingencies




Series A convertible preferred stock—par value $0.001 per share; 10,000,000 shares authorized; 40,000 and no shares issued and outstanding, respectively

39,812




Stockholders' equity




Common stock—par value $0.001 per share; 500,000,000 shares authorized; 100,241,416 and 93,001,597 shares issued and outstanding, respectively

100



93


Additional paid-in capital

684,219



583,097


Accumulated other comprehensive income

308



42


Accumulated deficit

(284,348)



(251,786)


Total stockholders' equity

400,279



331,446


Total liabilities, mezzanine equity and stockholders' equity

$

763,249



$

596,213






 

Redfin Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(in thousands, unaudited)



Nine Months Ended September 30,


2020


2019

Operating Activities




Net loss

$

(32,562)



$

(73,023)


Adjustments to reconcile net loss to net cash provided by (used in) operating activities:




Depreciation and amortization

10,581



6,366


Stock-based compensation

25,764



19,792


Amortization of debt discount and issuance costs

5,254



4,674


Non-cash lease expense

6,821



4,727


Impairment costs

2,063




Other

(693)



(401)


Change in assets and liabilities:




Accounts receivable, net

(21,862)



(9,071)


Inventory

49,597



(82,766)


Prepaid expenses and other assets

5,168



(82)


Accounts payable

851



579


Accrued liabilities, other payables, and non-current payroll tax liabilities

28,469



18,994


Lease liabilities

(8,368)



(5,095)


Origination of loans held for sale

(479,153)



(285,182)


Proceeds from sale of loans originated as held for sale

459,605



267,850


Net cash provided by (used in) operating activities

51,535



(132,638)


Investing activities




Purchases of property and equipment

(10,391)



(12,821)


Purchases of investments

(135,118)



(106,063)


Sales of investments

6,583



1,005


Maturities of investments

82,772



4,900


Net cash used in investing activities

(56,154)



(112,979)


Financing activities




Proceeds from the issuance of convertible preferred stock, net of issuance costs

39,801




Proceeds from the issuance of common stock, net of issuance costs

69,701




Proceeds from the issuance of shares resulting from employee equity plans

15,119



10,869


Tax payments related to net share settlements on restricted stock units

(10,987)



(2,856)


Borrowings from warehouse credit facilities

473,283



280,129


Repayments to warehouse credit facilities

(454,277)



(262,875)


Borrowings from secured revolving credit facility

57,378




Repayments to secured revolving credit facility

(46,899)




Other payables—deposits held in escrow

2,097



637


Principal payments for finance lease obligations

(59)




Cash paid for debt issuance costs

(4)



(152)


Net cash provided by financing activities

145,153



25,752


Effect of exchange rate changes on cash and cash equivalents

(16)



28


Net change in cash, cash equivalents, and restricted cash

140,518



(219,837)


Cash, cash equivalents, and restricted cash:




Beginning of period

247,448



439,055


End of period

$

387,966



$

219,218


 

Redfin Corporation and Subsidiaries

Supplemental Financial Information and Business Metrics

(unaudited)



Three Months Ended


Sep. 30,
2020


Jun. 30,
2020


Mar. 31,
2020


Dec. 31,
2019


Sep. 30,
2019


Jun. 30,
2019


Mar. 31,
2019


Dec. 31,
2018


Sep. 30,
2018

Monthly average visitors (in thousands)

49,258



42,537



35,519



30,595



35,633



36,557



31,107



25,212



29,236


Real estate services transactions


















Brokerage

18,980



13,828



10,751



13,122



16,098



15,580



8,435



9,822



12,876


Partner

5,180



2,691



2,479



2,958



3,499



3,357



2,125



2,749



3,333


Total

24,160



16,519



13,230



16,080



19,597



18,937



10,560



12,571



16,209


Real estate services revenue per transaction


















Brokerage

$

10,241



$

9,296



$

9,520



$

9,425



$

9,075



$

9,332



$

9,640



$

9,569



$

9,227


Partner

2,988



2,417



2,535



2,369



2,295



2,218



2,153



2,232



2,237


Aggregate

8,686



8,175



8,211



8,127



7,865



8,071



8,134



7,964



7,790




















Aggregate home value of real estate services transactions (in millions)

$

12,207



$

7,576



$

6,098



$

7,588



$

9,157



$

8,986



$

4,800



$

5,825



$

7,653


U.S. market share by value

1.04

%


0.93

%


0.93

%


0.94

%


0.96

%


0.94

%


0.83

%


0.81

%


0.85

%

Revenue from top-10 Redfin markets as a percentage of real estate services revenue

63

%


63

%


61

%


62

%


63

%


64

%


64

%


66

%


66

%

Average number of lead agents

1,820



1,399



1,826



1,526



1,579



1,603



1,503



1,419



1,397


 

Redfin Corporation and Subsidiaries

Supplemental Financial Information

(unaudited, in thousands)



Three Months Ended September 30,


Nine Months Ended September 30,


2020


2019


2020


2019

Real estate services revenue








Brokerage revenue

$

194,375



$

146,096



$

425,269



$

372,809


Partner revenue

15,478



8,030



28,269



20,053


  Total real estate services revenue

209,853



154,126



453,538



392,862


Properties revenue

19,005



80,164



170,287



141,445


Other revenue

8,503



5,161



19,999



13,490


Intercompany eliminations

(445)



(768)



(2,248)



(1,192)


Total revenue

$

236,916



$

238,683



$

641,576



$

546,605










Cost of revenue








Real estate services

$

117,944



$

100,048



$

300,305



$

284,447


Properties

20,460



80,909



173,107



144,807


Other

5,885



5,117



18,422



14,065


Intercompany eliminations

(445)



(768)



(2,248)



(1,192)


Total cost of revenue

$

143,844



$

185,306



$

489,586



$

442,127










Gross profit by segment








Real estate services

$

91,909



$

54,078



$

153,233



$

108,415


Properties

(1,455)



(745)



(2,820)



(3,362)


Other

2,618



44



1,577



(575)


Total gross profit

$

93,072



$

53,377



$

151,990



$

104,478










Gross margin (percentage of revenue)








Real estate services

43.8

%


35.1

%


33.8

%


27.6

%

Properties

(7.7)



(0.9)



(1.7)



(2.4)


Other

30.8



0.9



7.9



(4.3)


Total gross margin

39.3



22.4



23.7



19.1


 

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SOURCE Redfin

Investor Relations: Shikher Mathur, 206-576-8610, ir@redfin.com; Public Relations: Mariam Sughayer, 206-876-1322, press@redfin.com