SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 23, 2020
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Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On March 23, 2020, our board of directors approved the following changes to the 2020 compensation of our executive officers:
Glenn Kelman, our President and Chief Executive Officer, will forgo his base salary for the remainder of 2020, effective from March 17, 2020.
Our executive officers will not be eligible to earn a bonus pursuant to our 2020 Executive Bonus Plan, which was suspended.
Item 7.01 Regulation FD Disclosure.
On March 26, 2020, we published a letter written by Robert Mylod, Jr., our Chairman, for our shareholders discussing our liquidity, RedfinNow's current inventory, and the compensation changes described under Item 5.02, as well as 2020 compensation changes for our board of directors. The contents of the letter are incorporated by reference into this Item 7.01, and a copy of the letter is furnished as Exhibit 99.1 to this report.
Mr. Mylod's letter contains forward-looking statements within the meaning of federal securities laws, including a statement about us accelerating our market share gains. We believe our expectations related to these forward-looking statements are reasonable, but actual results may turn out to be materially different. A significant factor that could cause actual results to differ materially is the adverse impact of COVID-19 on the U.S. economy, the residential real estate industry, and our business. For other factors, please see the risks and uncertainties identified under the heading "Risk Factors" in our Form 10-K for the year ended December 31, 2019, which is 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 report. We undertake no obligation to update forward-looking statements to reflect future events or circumstances.
Item 9.01 Financial Statements and Exhibits.
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.
Date: March 26, 2020
/s/ Chris Nielsen
Chief Financial Officer
To My Fellow Redfin Shareholders:
Last week, your board of directors held an unscheduled meeting with Redfin's management team to assess the impact that the COVID-19 virus is likely to have on our operations and financial position. We resolved in that meeting to undertake immediate actions to protect the assets of our company.
Near the very top of the list of those assets is our nationwide network of real estate agents who have made Redfin the most productive real estate brokerage in the United States. The compensation of our agents is heavily variable and driven by home sales. However, with an expected material drop-off in transactions in the coming weeks and months, our agents' wages are likely to be hurt disproportionately. Accordingly, we moved to temporarily increase the fixed portion of agent pay while we wait to better understand the length and severity of the economic downturn that is very likely coming. We’re committed to this increase in the short term, but if we see evidence that the downturn is likely to be prolonged, we may still have to make the painful choice to furlough some workers and lay off others, decisions that would apply to both headquarters employees and real estate agents.
Recognizing for now that increasing agents’ base pay will temporarily increase operating losses, our management team has decided to forego cash bonuses for 2020 and all of the employees at Redfin's headquarters have agreed to forego cash bonuses for the first half of 2020. Our CEO, Glenn Kelman, has elected to not take a salary for the remainder of 2020. Inspired by our management team's moves, our board of directors unanimously voted on Monday in favor of foregoing all cash fees associated with serving on Redfin's board for 2020. From a pure dollars and cents perspective, these moves help offset some of these costs. In reality, these moves are demonstrative of Redfin's most important asset: its culture. At its core, Redfin is a culture of service--in which your board of directors serves you, in which executives serve employees, in which engineers and analysts serve agents… and we all serve customers.
In a situation such as this, we are also quite focused on our balance sheet and our liquidity. We believe that despite the challenges ahead of us, our balance sheet is strong. We began March with $328 million of cash, cash equivalents, and short- and long-term investments, which consisted solely of U.S. government securities. Our $144 million of convertible debt does not mature until July 2023. Most importantly, we have been careful with our balance sheet commitment to RedfinNow home inventory. On March 17 RedfinNow suspended making further instant offers on homes. And we have moved with haste to sell RedfinNow homes that we own. As of March 26, 2020 we held approximately $68 million of RedfinNow homes in inventory, of which approximately $23 million are under contract to be purchased by consumers. This is down from December 31, 2019, when we held approximately $75 million in RedfinNow homes in inventory. We’re under contract to purchase approximately $7 million in additional inventory from home sellers.
Redfin is a relatively new company. But we are old enough to have operated through the financial crisis of 2008 with a far less proven business and a tiny fraction of the capital that we have today. That experience has helped inform some of the defensive measures that we are implementing. Nevertheless, we have every confidence that we will come out on the other side of this difficult time in a position to go on offense and further accelerate our market share gains.
Finally, this pandemic seems likely to change everything about real estate in favor of a technology-driven brokerage like Redfin. Rest assured that Glenn and the entire Redfin team are working at an accelerated pace to develop the tools that will further transform the way in which homes are bought and sold.
Bob Mylod, Redfin Chairman