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A service for Realtors · Saturday, December 15, 2018 · 471,249,159 Articles · 3+ Million Readers

Redfin Third-Quarter 2018 Revenue up 28% Year-over-Year to $140.3 Million

/EIN News/ -- SEATTLE, Nov. 08, 2018 (GLOBE NEWSWIRE) -- Redfin Corporation (NASDAQ: RDFN), the technology-powered residential real estate brokerage, today announced financial results for the third quarter ended September 30, 2018. All financial measures, unless otherwise noted, are presented on a GAAP basis and include stock-based compensation as well as depreciation and amortization expenses.

Revenue increased 28% year-over-year to $140.3 million during the third quarter. Gross profit was $42.3 million, an increase of 8% from $39.3 million in the third quarter of 2017. Gross margin was 30%, compared to 36% in the third quarter of 2017. Real estate services(1) gross profit was $43.0 million, an increase of 9% from $39.6 million in the third quarter of 2017. Real estate services gross margin was 34%, compared to 38% in the third quarter of 2017. Operating expenses were $39.0 million, an increase of 34% from $29.1 million in the third quarter of 2017. Operating expenses were 28% of revenue, up from 27% in the third quarter of 2017.

Net income was $3.5 million, compared to net income of $10.6 million in the third quarter of 2017. Stock-based compensation was $5.5 million, up from $2.7 million in the third quarter of 2017. Depreciation and amortization was $2.2 million, up from $1.8 million in the third quarter of 2017. Interest income was $1.8 million and interest expense was $1.6 million, up from $0.3 million and zero, respectively, in the third quarter of 2017.

GAAP net income (loss) per share, basic and diluted, reflects accretion expense for changes in the fair value of our redeemable convertible preferred stock, which was outstanding prior to its conversion to common stock following our initial public offering ("IPO"). GAAP net income per share, basic and diluted, was $0.04, compared to GAAP net loss per share, basic and diluted, of $0.50 in the third quarter of 2017. Adjusted net income per share, basic and diluted,(2) which excludes accretion expense for changes in the fair value of our redeemable convertible preferred stock and assumes its conversion to common stock in connection with our IPO as of the first day of the reported period, was $0.14 and $0.12, respectively, in the third quarter of 2017. As a result of the conversion of our redeemable convertible preferred stock in connection with our IPO, there was no accretion expense in the third quarter of 2018.

“Redfin’s steady third-quarter market share gains reflect the enduring appeal of our low prices and personal service,” said Redfin CEO Glenn Kelman. “A housing-market correction always makes it harder to grow revenues, but our ability to do so in even challenging markets speaks to our business’s fundamental strength. We believe that our improved third-quarter growth in traffic, as well as increased engagement levels between agents and customers, sets us up for continued share growth. Our investments in software to make our agents more efficient -- and to integrate all the paperwork and processes for buying and selling a home, getting a mortgage and transferring the title -- should let us compete at a price and a scale few other brokerages can.”

Highlights

  • Reached market share of 0.85% of U.S. existing home sales by value in the third quarter of 2018, a 0.14 percentage-point increase over the third quarter of 2017 and a 0.02 percentage-point increase over the second quarter of 2018.(3)
  • Continued to invest in delivering more personal service through Redfin agents meeting customers early in their search process to talk about the market and what it takes to buy a home. Homebuyer engagement, measured as the percentage of customers who sign up for a second meeting or write an offer with a Redfin agent within 30 days after their first meeting, grew nearly 8% for the customers we first met in July and August 2018 compared to those we met in July and August 2017. Even as the market softened, engagement was still up 5% for September 2018’s customers compared to September 2017’s. While market conditions will also affect customers’ ultimate success rate, the measures we’re taking to increase engagement can create a long-term competitive advantage for Redfin.
  • Expanded Redfin Mortgage to North Carolina and Colorado, now serving homebuyers in nine states and Washington D.C., with plans to launch in additional states in the coming months. Redfin Mortgage is part of our long-term vision for a move that can happen in weeks not months, with an entirely digital closing.
  • Launched Redfin Compete Score, which rates how aggressively buyers are likely to compete for a listing in cities and neighborhoods on a scale of 0 to 100. Compete Score uses data and insights that only Redfin has, like the numbers of competing offers and waived contingencies for homes sold by Redfin, to help homebuyers know how to approach an offer on a home, and home sellers to understand what to expect when listing their home.
  • Launched Owner Estimate, a tool for homeowners to create an estimate of their home's value based on their own knowledge of the property, and about nearby comparable sales.The Owner Estimate uses the same core machine-learning engine that powers the Redfin Estimate and invites homeowners to make updates, resulting in an even more accurate estimate of a home's value. These tools give Redfin a competitive advantage in building a franchise of homeowners who may one day choose to sell their home with Redfin.
  • Committed to the long-term expansion of RedfinNow, the service for buying homes directly from their owners, who can move on with cash in their pockets. Homeowners have been able to get an offer in as little as 48 hours after a RedfinNow buyer visits the home, and get their cash in as little as seven days after accepting the offer. RedfinNow then prepares the home for market and Redfin lists it online, with the goal of selling it at a profit. The service launched in Orange County in August and is also available in the Inland Empire region of Southern California and San Diego, with additional markets slated to launch in the coming months.
  • Expanded offer-writing software to Redfin agents in Portland, Oregon, North Carolina and Wisconsin. The software is now available in nine states and in Washington D.C. Each new Fast-Offers market requires extensive customization based on dozens of different forms, local customs around earnest-money amounts, and other deal terms. We’ll be adding additional markets for years, but we believe this software will let us move faster than any other broker, at a lower cost, and with comprehensive data about what it takes to win in each neighborhood.

(1) Prior to reporting our financial results for the second quarter ended June 30, 2018, we had one reportable segment ("real estate") that reflected revenue derived from commissions and fees charged on real estate services transactions closed by us or partner agents representing customers in buying and selling homes. Beginning with our financial results for the second quarter ended June 30, 2018, we recognized a new reportable segment ("properties") that reflects revenue from when we sell homes that we previously bought directly from homeowners. Concurrent with our recognition of the new "properties" segment, we changed the name of our "real estate" segment to "real estate services." Prior to our financial results for the second quarter ended June 30, 2018, we included the results from our "properties" segment as part of our "other" segment.

(2) Adjusted net income per share, basic and diluted, are non-GAAP financial measures as defined by the Securities and Exchange Commission ("SEC"). A reconciliation of GAAP to non-GAAP financial measures is provided below in the tables included in this press release. An explanation of these measures is also included below under the heading "Non-GAAP Financial Measures."

(3) 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 real estate services transactions conducted by our lead agents or our partner agents. 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 8, 2018, and are subject to substantial uncertainty.

For the fourth quarter of 2018 we expect:

  • Total revenue between $115.1 million and $118.3 million, representing year-over-year growth between 20% and 24% compared to the fourth quarter of 2017. Properties segment revenue between $15.0 million and $16.0 million is included in the guidance provided.
  • Net loss between $18.7 million and $16.6 million, compared to net loss of $1.8 million in the fourth quarter of 2017. This guidance includes approximately $5.9 million of expected stock-based compensation, $2.2 million of expected depreciation and amortization, $2.1 million of expected interest expense from the convertible senior notes issued in July 2018, and $1.9 million of expected interest income.

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 statements regarding our expansion of Redfin Mortgage, RedfinNow, and our offer-writing software, as described under Highlights, and 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 on Form 10-K for the fiscal year ended December 31, 2017, as supplemented by our Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2018, 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.

Non-GAAP Financial Measures
To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we have used non-GAAP financial measures, specifically adjusted net income (loss) per share, basic and diluted, in this press release. The presentation of these financial measures is not intended to be considered in isolation or as a substitute of, or superior to, financial information prepared and presented in accordance with GAAP.

We believe these non-GAAP financial measures enable comparison of financial results between periods where net income (loss) per share, basic and diluted, may vary independent of business performance. There are limitations associated with the use of non-GAAP financial measures as an analytical tool, in particular the adjustments to our GAAP financial measures reflect the exclusion of accretion expense, which is related to our redeemable convertible preferred stock that converted into common stock upon the completion of our IPO in August 2017. Included in weighted-average shares outstanding, basic and diluted, are shares of redeemable convertible preferred stock as if all such shares were converted to common stock on the first date of each period presented. These measures may be different from non-GAAP financial measures used by other companies, limiting its usefulness for comparison purposes. A reconciliation of adjusted net income (loss) per share, basic and diluted, to net income (loss) per share, basic and diluted, has been provided in the financial statement tables included in this press release, and investors are encouraged to review the reconciliation.

About Redfin
Redfin (www.redfin.com) is the technology-powered residential real estate brokerage. Founded by software engineers, we run the country's #1 most-visited brokerage website and offer a host of online tools to consumers, including the Redfin Estimate. We represent people buying and selling homes in over 80 markets throughout the United States. Our mission is to redefine real estate in the consumer’s favor. In a commission-driven industry, we put the customer first. We do this by pairing our own agents with our own technology to create a service that is faster, better, and costs less. Since our launch in 2006 through 2017, we have helped customers buy or sell more than 120,000 homes worth more than $60 billion.

Redfin-F

Contacts

Investor Relations
Elena Perron, 206-576-8610
ir@redfin.com

Public Relations
Rachel Musiker, 206-588-6863
press@redfin.com

       
Redfin Corporation and Subsidiaries
Condensed Consolidated Statements of Operations
(unaudited, in thousands, except share and per share amounts)
       
  Three Months Ended
September 30,
  Nine Months Ended
September 30,
  2018   2017   2018   2017
Revenue $ 140,255     $ 109,479     $ 362,791     $ 274,282  
Cost of revenue (1) 97,950     70,166     269,576     191,633  
Gross profit 42,305     39,313     93,215     82,649  
Operating expenses:              
Technology and development (1) 14,310     11,483     40,105     31,245  
Marketing (1) 8,236     5,588     36,006     26,179  
General and administrative (1) 16,470     11,995     48,532     38,828  
Total operating expenses 39,016     29,066     124,643     96,252  
Income (loss) from operations 3,289     10,247     (31,428 )   (13,603 )
Interest income 1,775     311     3,082     387  
Interest expense (1,610 )       (1,610 )    
Other income, net 21         200     13  
Net income (loss) $ 3,475     $ 10,558     $ (29,756 )   $ (13,203 )
Accretion of redeemable convertible preferred stock $     $ (40,224 )   $     $ (175,915 )
Net income (loss) attributable to common stock - basic and diluted $ 3,475     $ (29,666 )   $ (29,756 )   $ (189,118 )
Net income (loss) per share attributable to common stock - basic $ 0.04     $ (0.50 )   $ (0.35 )   $ (6.37 )
Net income (loss) per share attributable to common stock - diluted $ 0.04     $ (0.50 )   $ (0.35 )   $ (6.37 )
Weighted average shares - basic 87,743,223     58,868,903     84,327,266     29,678,082  
Weighted average shares - diluted 94,642,463     58,868,903     84,327,266     29,678,082  
                       

(1) Includes stock-based compensation as follows:

       
  Three Months Ended September 30,   Nine Months Ended September 30,
  2018   2017   2018   2017
Cost of revenue $ 1,370     $ 715     $ 4,061     $ 2,129  
Technology and development 2,135     819     5,334     2,301  
Marketing 155     121     431     362  
General and administrative 1,838     1,054     4,646     3,236  
Total $ 5,498     $ 2,709     $ 14,472     $ 8,028  
                               


       
Redfin Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except share and per share amounts)
       
  September 30, 2018   December 31, 2017
  (unaudited)    
Assets:      
Current assets:      
Cash and cash equivalents $ 448,968     $ 208,342  
Restricted cash 11,968     4,316  
Prepaid expenses 5,933     8,613  
Accrued revenue, net 13,254     13,334  
Inventory 25,161     3,382  
Loans held for sale 5,921     1,891  
Other current assets 989     328  
Total current assets 512,194     240,206  
Property and equipment, net 23,361     22,318  
Intangible assets, net 2,928     3,294  
Goodwill 9,186     9,186  
Other assets 7,248     6,951  
Total assets 554,917     281,955  
Liabilities and stockholders' equity:      
Current liabilities:      
Accounts payable 2,601     1,901  
Accrued liabilities 37,532     26,605  
Other payables 12,167     4,068  
Loan facility 5,790     2,016  
Current portion of deferred rent 1,691     1,267  
Total current liabilities 59,781     35,857  
Deferred rent, net of current portion 10,258     10,668  
Convertible senior notes, net 112,130      
Total liabilities 182,169     46,525  
Commitments and contingencies      
Stockholders’ equity:      
Common stock—par value $0.001 per share; 500,000,000 shares authorized; 89,234,819 and 81,468,891 shares issued and outstanding, respectively 89     81  
Preferred stock—par value $0.001 per share; 10,000,000 shares authorized and no shares issued and outstanding      
Additional paid-in capital 531,418     364,352  
Accumulated deficit (158,759 )   (129,003 )
Total stockholders’ equity 372,748     235,430  
Total liabilities and stockholders’ equity $ 554,917     $ 281,955  
               


   
Redfin Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(unaudited, in thousands)
   
  Nine Months Ended September 30,
  2018   2017
Operating activities:      
Net loss $ (29,756 )   $ (13,203 )
Adjustments to reconcile net loss to net cash used in operating activities:      
Depreciation and amortization 6,123     5,326  
Stock-based compensation 14,472     8,028  
Amortization of debt discount and issuance costs 1,128      
Change in assets and liabilities:      
Prepaid expenses 2,680     (84 )
Accrued revenue 80     (2,712 )
Inventory (21,779 )   (5,399 )
Other current assets (576 )   8,556  
Other long-term assets (296 )   244  
Accounts payable 702     1,228  
Accrued liabilities 10,943     8,513  
Deferred lease liability (913 )   1,001  
Accrued expenses 414      
Origination of loans held for sale (56,157 )   (5,755 )
Proceeds from sale of loans originated as held for sale 52,127     5,030  
Net cash provided by (used in) operating activities (20,808 )   10,773  
Investing activities:      
Maturities and sales of short-term investments     1,484  
Purchases of short-term investments     (993 )
Purchases of property and equipment (5,528 )   (10,499 )
Net cash used in investing activities (5,528 )   (10,008 )
Financing activities:      
Proceeds from issuance of convertible senior notes, net 138,953      
Proceeds from follow-on offering, net 107,593      
Proceeds from issuance of common stock 17,314     2,519  
Tax payment related to net share settlements on restricted stock units (705 )    
Proceeds from initial public offering, net of underwriting discounts     148,088  
Payment of initial public offering costs     (3,449 )
Borrowings from warehouse credit facilities 54,806     5,603  
Repayments of warehouse credit facilities (51,031 )   (4,898 )
Other payables - customer escrow deposits related to title services 7,684     6,065  
Net cash provided by financing activities 274,614     153,928  
Net change in cash, cash equivalents, and restricted cash 248,278     154,693  
Cash, cash equivalents, and restricted cash:      
Beginning of period 212,658     67,845  
End of period $ 460,936     $ 222,538  
Supplemental disclosure of non-cash investing and financing activities:      
Accretion of redeemable convertible preferred stock $     $ (175,915 )
Stock-based compensation capitalized in property and equipment $ (363 )   $ (194 )
Initial public offering cost accruals $     $ (200 )
Property and equipment additions in accounts payable and accrued expenses $ (25 )   $  
Leasehold improvements paid directly by lessor $ (926 )   $ (104 )
Cash in transit for exercised stock options $ (85 )   $  
               


   
Redfin Corporation and Subsidiaries
Supplemental Financial Information and Business Metrics
(unaudited)
   
  Three Months Ended
  Sep. 30,
2018
  Jun. 30,
2018
  Mar. 31,
2018
  Dec. 31,
2017
  Sep. 30,
2017
  Jun. 30,
2017
  Mar. 31,
2017
  Dec. 31,
2016
  Sep. 30,
2016
Monthly average visitors (in thousands) 29,236     28,777     25,820     21,377     24,518     24,400     20,162     16,058     17,795  
Real estate services transactions:                                  
Brokerage 12,876     12,971     7,285     8,598     10,527     10,221     5,692     6,432     7,934  
Partner 3,333     3,289     2,237     2,739     3,101     2,874     2,041     2,281     2,663  
Total 16,209     16,260     9,522     11,337     13,628     13,095     7,733     8,713     10,597  
                                   
Real estate services revenue per transaction:                                  
Brokerage $ 9,227     $ 9,510     $ 9,628     $ 9,659     $ 9,289     $ 9,301     $ 9,570     $ 9,428     $ 9,333  
Partner 2,237     2,281     2,137     2,056     1,960     1,945     1,911     1,991     1,932  
Aggregate $ 7,790     $ 8,048     $ 7,869     $ 7,822     $ 7,621     $ 7,687     $ 7,548     $ 7,481     $ 7,474  
                                   
Aggregate home value of real estate services transactions (in millions) $ 7,653     $ 7,910     $ 4,424     $ 5,350     $ 6,341     $ 6,119     $ 3,470     $ 4,018     $ 4,898  
U.S. market share by value 0.85 %   0.83 %   0.73 %   0.71 %   0.71 %   0.64 %   0.58 %   0.56 %   0.57 %
Revenue from top-10 Redfin markets as a percentage of real estate services revenue 66 %   68 %   66 %   69 %   69 %   69 %   68 %   71 %   72 %
Average number of lead agents 1,397     1,415     1,327     1,118     1,028     1,010     935     796     756  
                                                     


       
Redfin Corporation and Subsidiaries
Supplemental Financial Information
(unaudited, in thousands)
       
  Three Months Ended September 30,   Nine Months Ended September 30,
  2018   2017   2018   2017
Revenue by segment:              
Brokerage revenue $ 118,809     $ 97,787     $ 312,306     $ 247,327  
Partner revenue 7,456     6,077     19,741     15,567  
Total real estate services revenue 126,265     103,864     332,047     262,894  
Properties revenue 11,350     3,364     23,388     5,345  
Other revenue 2,640     2,251     7,356     6,043  
Total revenue $ 140,255     $ 109,479     $ 362,791     $ 274,282  
               
Cost of revenue by segment:              
Real estate services cost of revenue $ 83,274     $ 64,258     $ 236,775     $ 178,850  
Properties cost of revenue 11,656     3,326     24,086     5,361  
Other cost of revenue 3,020     2,582     8,715     7,422  
Total cost of revenue $ 97,950     $ 70,166     $ 269,576     $ 191,633  
               
Gross profit by segment:              
Real estate services gross profit $ 42,991     $ 39,606     95,272     84,044  
Properties gross profit (306 )   38     (698 )   (16 )
Other gross profit (380 )   (331 )   (1,359 )   (1,379 )
Total gross profit $ 42,305     $ 39,313     $ 93,215     $ 82,649  
                               


       
Redfin Corporation and Subsidiaries
Reconciliation of GAAP to non-GAAP Financial Measures
(unaudited, in thousands, except share and per share amounts)
       
  Three Months Ended
September 30,
  Nine Months Ended
September 30,
  2018*   2017   2018*   2017
Net income (loss) attributable to common stock, as reported $ 3,475     $ (29,666 )   $ (29,756 )   $ (189,118 )
Adjustments:              
Add-back: Accretion of redeemable convertible preferred stock     40,224         175,915  
Net income (loss) attributable to common stock, adjusted $ 3,475     $ 10,558     $ (29,756 )   $ (13,203 )
Non-GAAP adjusted net income (loss) per share - basic $ 0.04     $ 0.14     $ (0.35 )   $ (0.18 )
Non-GAAP adjusted net income (loss) per share - diluted $ 0.04     $ 0.12     $ (0.35 )   $ (0.18 )
Weighted-average shares used to compute non-GAAP adjusted net income (loss) per share — basic 87,743,223     78,146,121     84,327,266     72,919,424  
Weighted-average shares used to compute non-GAAP adjusted net income (loss) per share — diluted 94,642,463     86,447,910     84,327,266     72,919,424  
               
Reconciliation of weighted-average shares used to compute net income (loss) per share attributable to common stockholders, from GAAP to non-GAAP — basic and diluted:              
               
Weighted-average shares used to compute GAAP net income (loss) per share attributable to common stockholders — basic 87,743,223     58,868,903     84,327,266     29,678,082  
               
Conversion of redeemable convertible preferred stock as of beginning of period presented     19,277,218         43,241,342  
Weighted-average shares used to compute non-GAAP adjusted net income (loss) per share — basic 87,743,223     78,146,121     84,327,266     72,919,424  
               
Weighted-average shares used to compute GAAP net income (loss) per share attributable to common stockholders — diluted 94,642,463     58,868,903     84,327,266     29,678,082  
               
Conversion of redeemable convertible preferred stock as of beginning of period presented     19,277,218         43,241,342  
Incremental options to purchase common stock     8,301,789          
Weighted-average shares used to compute non-GAAP adjusted net income (loss) per share — diluted 94,642,463     86,447,910     84,327,266     72,919,424  
                       
*  All amounts for 2018 are presented on a GAAP basis and included for comparative purposes.
                       

 

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