rdfn-20201105
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) November 5, 2020
Redfin Corporation
(Exact name of registrant as specified in its charter)
Delaware
001-3816074-3064240
(State or other jurisdiction of incorporation or organization)
(Commission File Number)
(I.R.S. Employer Identification No.)
1099 Stewart Street
Suite 600
Seattle
WA
98101
(Address of principal executive offices)
(Zip Code)
(206)576-8333
Registrant's telephone number, including area code
(Former name, former address and former fiscal year, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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 is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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.



Item 2.02 Results of Operations and Financial Condition.

On November 5, 2020, we reported our financial results for the quarter ended September 30, 2020. A copy of our earnings release is furnished as exhibit 99.1 to this report.

Item 9.01 Financial Statements and Exhibits.
Exhibit Number
Description
99.1
104
Cover page interactive data file, submitted using inline XBRL

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Redfin Corporation
(Registrant)
Date: November 5, 2020/s/ Chris Nielsen
Chris Nielsen
Chief Financial Officer

Document


https://cdn.kscope.io/50439c72e0afebdd95baa7ac675e05d9-redfinlogoa141a.jpg

Redfin Reports Third Quarter 2020 Financial Results

SEATTLE - November 5, 2020 - 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.
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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
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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

Contacts

Investor Relations
Shikher Mathur, 206-576-8610
ir@redfin.com

Public Relations
Mariam Sughayer, 206-876-1322
press@redfin.com
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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
2020201920202019
Revenue
Service$217,280 $158,519 $469,893 $405,160 
Product19,636 80,164 171,683 141,445 
Total revenue236,916 238,683 641,576 546,605 
Cost of revenue(1)
Service122,583 104,397 314,842 297,320 
Product21,261 80,909 174,744 144,807 
Total cost of revenue143,844 185,306 489,586 442,127 
Gross profit93,072 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 expenses56,063 45,941 176,837 176,913 
Income (loss) from operations37,009 7,436 (24,847)(72,435)
Interest income319 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—basic99,840,144 91,994,731 97,365,122 91,279,086 
Net income (loss) per share attributable to common stock—diluted0.30 0.07 (0.36)(0.80)
Weighted average shares of common stock—diluted107,607,711 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(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,
2020201920202019
Cost of revenue$2,574 $1,605 $5,981 $4,398 
Technology and development4,964 3,320 11,736 8,661 
Marketing403 390 1,130 1,025 
General and administrative3,407 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.
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Redfin Corporation and Subsidiaries
Consolidated Balance Sheets
(in thousands, except share and per share amounts, unaudited)
September 30, 2020December 31, 2019
Assets
Current assets
Cash and cash equivalents$371,573 $234,679 
Restricted cash16,393 12,769 
Short-term investments129,809 70,029 
Accounts receivable, net41,085 19,223 
Inventory24,993 74,590 
Loans held for sale41,921 21,985 
Prepaid expenses7,698 14,822 
Other current assets5,189 3,496 
Total current assets638,661 451,593 
Property and equipment, net42,210 39,577 
Right-of-use assets, net45,392 52,004 
Long-term investments17,072 30,978 
Goodwill and intangibles, net11,138 11,504 
Other non-current assets8,776 10,557 
Total assets$763,249 $596,213 
Liabilities, mezzanine equity and stockholders' equity
Current liabilities
Accounts payable$3,375 $2,122 
Accrued liabilities57,517 38,022 
Other payables10,550 7,884 
Warehouse credit facilities40,308 21,302 
Secured revolving credit facility14,923 4,444 
Convertible senior notes, net124,495 — 
Current lease liabilities11,682 11,408 
Total current liabilities262,850 85,182 
Non-current lease liabilities and deposits51,597 59,869 
Convertible senior notes, net— 119,716 
Non-current payroll tax liabilities8,711 — 
Total liabilities323,158 264,767 
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, respectively39,812 — 
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, respectively100 93 
Additional paid-in capital684,219 583,097 
Accumulated other comprehensive income308 42 
Accumulated deficit(284,348)(251,786)
Total stockholders’ equity400,279 331,446 
Total liabilities, mezzanine equity and stockholders’ equity$763,249 $596,213 
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Redfin Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands, unaudited)
Nine Months Ended September 30,
20202019
Operating Activities
Net loss
$(32,562)$(73,023)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization10,581 6,366 
Stock-based compensation25,764 19,792 
Amortization of debt discount and issuance costs5,254 4,674 
Non-cash lease expense6,821 4,727 
Impairment costs2,063 — 
Other(693)(401)
Change in assets and liabilities:
Accounts receivable, net(21,862)(9,071)
Inventory49,597 (82,766)
Prepaid expenses and other assets5,168 (82)
Accounts payable851 579 
Accrued liabilities, other payables, and non-current payroll tax liabilities28,469 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 sale459,605 267,850 
Net cash provided by (used in) operating activities51,535 (132,638)
Investing activities
Purchases of property and equipment(10,391)(12,821)
Purchases of investments(135,118)(106,063)
Sales of investments6,583 1,005 
Maturities of investments82,772 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 costs39,801 — 
Proceeds from the issuance of common stock, net of issuance costs69,701 — 
Proceeds from the issuance of shares resulting from employee equity plans15,119 10,869 
Tax payments related to net share settlements on restricted stock units(10,987)(2,856)
Borrowings from warehouse credit facilities473,283 280,129 
Repayments to warehouse credit facilities(454,277)(262,875)
Borrowings from secured revolving credit facility57,378 — 
Repayments to secured revolving credit facility(46,899)— 
Other payables—deposits held in escrow2,097 637 
Principal payments for finance lease obligations(59)— 
Cash paid for debt issuance costs(4)(152)
Net cash provided by financing activities145,153 25,752 
Effect of exchange rate changes on cash and cash equivalents(16)28 
Net change in cash, cash equivalents, and restricted cash140,518 (219,837)
Cash, cash equivalents, and restricted cash:
Beginning of period247,448 439,055 
End of period
$387,966 $219,218 
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Redfin Corporation and Subsidiaries
Supplemental Financial Information and Business Metrics
(unaudited)
Three Months Ended
Sep. 30 2020Jun. 30, 2020Mar. 31, 2020Dec. 31, 2019Sep. 30, 2019Jun. 30, 2019Mar. 31, 2019Dec. 31, 2018Sep. 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
Brokerage18,980 13,828 10,751 13,122 16,098 15,580 8,435 9,822 12,876 
Partner5,180 2,691 2,479 2,958 3,499 3,357 2,125 2,749 3,333 
Total24,160 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 
Partner2,988 2,417 2,535 2,369 2,295 2,218 2,153 2,232 2,237 
Aggregate8,686 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 value1.04 %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 revenue63 %63 %61 %62 %63 %64 %64 %66 %66 %
Average number of lead agents1,820 1,399 1,826 1,526 1,579 1,603 1,503 1,419 1,397 
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Redfin Corporation and Subsidiaries
Supplemental Financial Information
(unaudited, in thousands)
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Real estate services revenue
Brokerage revenue$194,375 $146,096 $425,269 $372,809 
Partner revenue15,478 8,030 28,269 20,053 
  Total real estate services revenue209,853 154,126 453,538 392,862 
Properties revenue19,005 80,164 170,287 141,445 
Other revenue8,503 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 
Properties20,460 80,909 173,107 144,807 
Other5,885 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)
Other2,618 44 1,577 (575)
Total gross profit$93,072 $53,377 $151,990 $104,478 
Gross margin (percentage of revenue)
Real estate services43.8 %35.1 %33.8 %27.6 %
Properties(7.7)(0.9)(1.7)(2.4)
Other30.8 0.9 7.9 (4.3)
Total gross margin39.3 22.4 23.7 19.1 

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