Redfin Reports Third Quarter 2020 Financial Results

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November 5, 2020 4:01 PM EST

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 OutlookThe 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 CallRedfin 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 StatementsThis 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 RedfinRedfin 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

 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/redfin-reports-third-quarter-2020-financial-results-301167383.html

SOURCE Redfin


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