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 | ||||||||||||||||||||||
| 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.
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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 | |||||||
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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 | |||||||
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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 | ||||||||||||||||||||||||||||||||||||||||||||
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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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