September 07, 2017
Redfin Second-Quarter 2017 Revenue up 35% Year-over-Year to $104.9 Million

SEATTLE - Sep. 7, 2017 - Redfin Corporation (NASDAQ: RDFN), the technology-powered residential real estate brokerage, today announced financial results for the second quarter ended June 30, 2017. All financial measures are presented on a GAAP basis and include stock-based compensation.

Revenue increased 35% year-over-year to $104.9 million during the second quarter, including $2.0 million from Redfin Now(1). Gross profit was $37.0 million, an increase of 35% over the second quarter of 2016. Gross margin was 35%, compared to 35% in the second quarter of 2016. Operating expenses were $32.7 million, an increase of 25% from $26.1 million in the second quarter of 2016. Operating expenses were 31% of revenue, down from 34% in the second quarter of 2016.

Net income was $4.3 million, compared to $1.4 million in the second quarter of 2016. Stock-based compensation was $2.6 million, up from $1.9 million in the second quarter of 2016. Depreciation and amortization was $1.6 million, up from $1.5 million in the second quarter of 2016. Assuming the conversion of outstanding shares of preferred common stock following our initial public offering, pro forma net income per share was $0.06 for the second quarter of 2017.

“Redfin’s market-share growth accelerated in the second quarter, in part because so many people have been visiting our website,” said Redfin CEO Glenn Kelman. “Redfin.com visitors have grown at a higher rate over each of the past three quarters than in any quarter in the last three years. And more of those visitors are connecting with a Redfin agent because our technology lets those customers move faster to tour and buy homes. Technology also benefits our home-sellers, by promoting their listing to a huge online audience, and by driving long-term efficiency gains that help us charge less and still deliver better results.”

Second-Quarter Highlights

  • Accelerated market-share gains, serving 0.64% of U.S. existing home sales by value in the second quarter of 2017, an increase of 0.11 percentage points from the second quarter of 2016. The year-over-year gain for the first quarter of 2017 was 0.10 percentage points.(2)
  • Increased visitors to our website and mobile application by 43% over the second quarter of 2016 to more than 24 million monthly average visitors, making Redfin the fastest-growing top-10 real estate website.
  • Commissioned a third-party study to measure the speed of listing notifications, which showed that Redfin notifies customers about newly listed homes between three and 18 hours faster than other leading real estate websites. This advantage is the result of a streaming architecture that Redfin has developed over the past two years to notify customers about new listings, recommended listings, price changes, and home sales.
  • Saved customers more than $36 million in fees in the second quarter compared to what they would have paid with an aggregate 5% commission, while delivering a level of customer satisfaction that market-research firms have established is significantly higher than traditional brokers’.
  • Increased the total number of subscribers to the Redfin Home Report, a monthly email estimate on what a home is worth, by 26%. The magnitude of such a gain over a three-month span is significant given that Redfin has been accumulating subscribers since 2011, but much of it was a one-time gain that we got by inferring for the first time where a potential subscriber lives and whether she wants a home report. We believe subscriptions have also been increasing due to the accuracy of the Redfin Estimate, which uses artificial intelligence, cloud computing, and local data sets to estimate the value of a home for sale better than our competitors. A 2017 third-party study found Redfin's estimate was more than twice as likely as two other leading home-value estimates to be within 3% of a listing’s final sale price.
  • Increased the percentage of home tours scheduled automatically from 41% in March to 51% in June. Automatic tour scheduling lowers labor costs and makes it easier for customers to try Redfin, which drives growth. Most important, automatically scheduling tours often lets our customers move faster than other homebuyers to see and ultimately to buy the most desirable listings.
  • Lowered the fee the customer pays to a Redfin listing agent from 1.5% to 1% in the San Diego area. Compared to the 2.5% fee often charged by traditional San Diego-area listing agents, Redfin's 1% fee saves customers about $7,500 on the sale of a $500,000 home. To offset the lower listing fee, Redfin increased prices for its San Diego-area homebuyers, which should result in the same revenue per transaction when averaged across buyers and sellers. Over the past two years, Redfin has rolled out this pricing to Baltimore, Chicago, Denver, Seattle and Washington, D.C. areas, modestly accelerating overall share gains. In Redfin's remaining markets, the company continues to charge customers 1.5% for the services of its listing agents.

(1) Redfin Now is an experimental new service where we buy homes directly from home sellers and resell them to homebuyers. Revenue earned from selling homes previously purchased by Redfin Now is recorded at closing on a gross basis, representing the sales price of the home. For Redfin Now, cost of revenue includes the cost of homes such as the purchase price and capitalized improvements. There was no revenue from Redfin Now in any period prior to the three months ended June 30, 2017.

(2) We calculate the aggregate value of U.S. home sales by multiplying the total number of U.S. home sales by the mean sale price of these sales, each as reported by the National Association of REALTORS®. We calculate our market share by aggregating the home value of real estate 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 September 7, 2017, and are subject to substantial uncertainty.

For the third quarter of 2017 we expect:

  • Revenue between $108.5 million and $110.5 million, representing year-over-year growth between 34% and 36% compared to the third quarter of 2016. Redfin Now revenue between $2.6 million and $3.6 million is included in the guidance provided.
  • Net income between $10.0 million and $10.8 million, compared with $5.7 million in the third quarter of 2016. This guidance includes approximately $2.8 million of stock-based compensation and $1.7 million of depreciation and amortization. Stock-based compensation was $2.2 million and depreciation and amortization was $1.6 million the third quarter of 2016.

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 approximately three months following the conference call.

Forward-Looking Statements

This press release contains certain forward-looking statements within the meaning of federal securities laws, including statements regarding our future operating results and financial position, business strategy and plans, product, service, and technology offerings, market conditions, growth and trends, and objectives for future operations, home report subscriptions increasing due to the accuracy of the Redfin Estimate, technology driving long-term efficiency gains and service improvements, and statements under the header Business Outlook. We believe our expectations related to these forward-looking statements are reasonable, but actual results may turn out to be materially different. Please see our filings with the Securities and Exchange Commission for more information on the risks and uncertainties that could cause actual results to differ materially from the forward-looking statements in this press release. These risks include, among other things: that we operate in a seasonal and cyclical industry and may be affected by industry downturns; we have a history of losses; and our business is concentrated in certain geographic markets. Moreover, we operate in a very competitive and rapidly changing environment, and new risks and uncertainties may emerge that could impact the forward-looking statements in this press release. Additional risks and uncertainties that could affect our financial results are included under the caption “Risk Factors” in our final prospectus filed pursuant to Rule 424(b)(4) on July 28, 2017, which is available on our Investor Relations website at http://investors.redfin.com and on the SEC website at www.sec.gov. Additional information will also be set forth in our Quarterly Report on Form 10-Q for the three months ended June 30, 2017. 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 Corporation (www.redfin.com) is a technology-powered, residential real estate brokerage. Founded by software engineers, we run the country's #1 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 2016, we have helped customers buy or sell more than 75,000 homes worth more than $40 billion.

 
Redfin Corporation and Subsidiaries
Condensed Consolidated Statements of Operations
(in thousands, except share and per share amounts, unaudited)
         
    Three Months Ended June 30,   Six Months Ended June 30,
    2016   2017   2016   2017
                 
Revenue   $ 77,714     $ 104,935     $ 119,349     $ 164,802  
Cost of revenue(1)   50,303     67,975     88,808     121,467  
Gross profit   27,411     36,960     30,541     43,335  
Operating expenses:                
Technology and development(1)   8,060     10,090     15,958     19,762  
Marketing(1)   8,486     10,132     17,697     20,591  
General and administrative(1)   9,526     12,466     19,912     26,833  
Total operating expenses   26,072     32,688     53,567     67,186  
Income (loss) from operations   1,339     4,272     (23,026)     (23,851)  
Interest income   49     32     96     76  
Other income, net           37     13  
Total interest income and other income, net   49     32     133     89  
Net income (loss)   $ 1,388     $ 4,304     $ (22,893)     $ (23,762)  
Accretion of redeemable convertible preferred stock   65,082     (110,921)     59,869     (135,690)  
Undistributed earnings attributable to participating securities   (52,805)         (29,397      
Net income (loss) attributable to common stock—basic   $ 13,665     $ (106,617)     $ 7,579     $ (159,452)  
Net income (loss) attributable to common stock—diluted   $ 1,386     $ (106,617     $ (22,894     $ (159,453)  
Net income (loss) per share attributable to common stock—basic   $ 0.95     $ (7.15)     $ 0.53     $ (10.74)  
Net income (loss) per share attributable to common stock—diluted   $ 0.02     $ (7.15)     $ (0.33     $ (10.74)  
Weighted average shares used to compute net income (loss) per share attributable to common stock—basic   14,340,333     14,913,234     14,288,550     14,840,759  
Weighted average shares used to compute net income (loss) per share attributable to common stock—diluted   74,080,026     14,913,234     69,710,552     14,840,759  
Pro forma net income (loss) per share attributable to common stock—basic and diluted       $ 0.06         $ (0.34)  
Pro forma weighted-average shares used to compute net income (loss) per share attributable to common stock—basic and diluted       70,335,236         70,262,761  

(1) Includes stock-based compensation as follows:

    Three Months Ended June 30,   Six Months Ended June 30,
    2016   2017   2016   2017
     
Cost of revenue   $ 525     $ 699     $ 1,043     $ 1,414
Technology and development   559     751     1,098     1,482
Marketing   112     123     221     242
General and administrative   718     1,065     1,372     2,182
Total   $ 1,914     $ 2,638     $ 3,734     $ 5,320
                               
             
Redfin Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except share and per share amounts, unaudited)
             
    December 31,   June 30,  

Pro Forma, June 30,

    2016   2017   2017
         
Assets:            
Current assets:            
Cash and cash equivalents   $ 64,030     $ 54,210      
Restricted cash   3,815     11,848      
Short-term investments   1,749     1,504      
Prepaid expenses   4,388     2,546      
Accrued revenue, net of allowance for doubtful accounts of $150 at December 31, 2016 and June 30, 2017   10,625     14,509      
Other current assets   8,781     2,298      
Loans held for sale       545      
Total current assets   93,388     87,460      
Property and equipment, net   19,226     22,137      
Intangible assets, net   3,782     3,538      
Goodwill   9,186     9,186      
Deferred offering costs   720     2,299      
Other assets   7,175     6,798      
Total assets:   $ 133,477     $ 131,418      
Liabilities, redeemable convertible preferred stock and stockholders' equity (deficit):            
Current liabilities:            
Accounts payable   $ 5,385     $ 3,081      
Accrued liabilities   22,253     30,248      
Other payables   3,793     11,607      
Loan facility       529      
Current portion of deferred rent   1,512     1,092      
Total current liabilities   32,943     46,557      
Deferred rent, net of current portion   8,852     10,473      
Total liabilities   41,795     57,030      
Commitments and contingencies (Note 10)            
Redeemable convertible preferred stock—par value $0.001 per share; 166,266,114 shares authorized; 55,422,002 issued and outstanding; and aggregate liquidation preference of $167,488   655,416     791,106      
Stockholders’ equity (deficit)            
Common stock—par value $0.001 per share; 290,081,638 and 290,081,638 shares authorized, respectively; 14,687,024 and 14,988,646 shares issued and outstanding, respectively   15     15     70  
Additional paid-in capital           212,081  
Accumulated deficit   (563,749)     (716,733)     (137,763)  
Total stockholders’ equity (deficit)   (563,734)     (716,718)     74,388  
Total liabilities, redeemable convertible preferred stock and stockholders’ equity:   $ 133,477     $ 131,418      
                     
     
Redfin Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands, unaudited)
     
    Six Months Ended June 30,
    2016   2017
         
Operating Activities    
Net income (loss)   $ (22,893)     $ (23,762)  
Adjustments to reconcile net income (loss) to net cash used in operating activities:        
Depreciation and amortization   2,935     3,539  
Stock-based compensation.   3,734     5,320  
Change in assets and liabilities:        
Restricted cash   (8,610)     (8,032)  
Prepaid expenses   4,523     1,842  
Accrued revenue   (7,168)     (3,885)  
Other current assets   (10)     6,482  
Other long-term assets   (5,816)     377  
Accounts payable   332     901  
Accrued expenses   5,859     8,481  
Other payables   8,609     7,814  
Deferred lease liability   (157)     1,097  
Origination of loans held for sale       (3,022)  
Proceeds from sale of loans originated as held for sale       2,477  
Net cash used in operating activities   (18,662)     (371)  
Investing activities        
Maturities of short-term investments   1,644     1,239  
Purchases of short-term investments   (1,644)     (992)  
Purchases of property and equipment   (2,660)     (9,435)  
Net cash used in investing activities   (2,660)     (9,188)  
Financing activities        
Proceeds from exercise of stock options   462     1,017  
Payment of deferred initial public offering costs       (1,807)  
Borrowings from warehouse credit facilities       2,932  
Repayments of warehouse credit facilities       (2,403)  
Net cash provided by (used in) financing activities   462     (261)  
Net change in cash and cash equivalents   (20,860)     (9,820)  
Cash and cash equivalents:        
Beginning of period   85,597     64,030  
End of period   $ 64,737     $ 54,210  
Supplemental disclosure of non-cash investing and financing activities        
Accretion of redeemable convertible preferred stock   $ 59,869     $ (135,690)  
Stock-based compensation capitalized in property and equipment   $ (39)     $ (131)  
Deferred initial public offering cost accruals   $     $ (343)  
Leasehold improvements paid directly by lessor   $     $ (104)  
                 
     
Redfin Corporation and Subsidiaries
Supplemental Financial Information and Business Metrics
(unaudited)
     
   

Jun. 30, 2015

  Sep. 30, 2015   Dec. 31, 2015   Mar. 31, 2016  

Jun. 30, 2016

  Sep. 30, 2016   Dec. 31, 2016   Mar. 31, 2017  

Jun. 30, 2017

                                     
Monthly average visitors (in thousands)   12,381     13,060     11,142     13,987     17,021     17,795     16,058     20,162     24,400  
Real estate transactions:                                    
Brokerage   5,465   5,653   4,510   4,005   7,497   7,934   6,432   5,692   10,221  
Partner   2,456   2,718   2,273   1,936   2,602   2,663   2,281   2,041   2,874  

Total

  7,921   8,371   6,783   5,941   10,099   10,597   8,713   7,733   13,095  
                                     
Real estate revenue per real estate transaction:                                    
Brokerage   $ 9,243     $ 9,343     $ 9,242     $ 9,485     $ 9,524     $ 9,333     $ 9,428     $ 9,570     $ 9,301  
Partner   1,164     1,191     1,177     1,224     1,633     1,932     1,991     1,911     1,945  
Aggregate   6,738     6,696     6,539     6,793     7,491     7,474     7,481     7,548     7,687  
                                     
Aggregate home value of real estate transactions (in millions)  
3,601
 
3,837
 
2,984
 
2,599
 
4,684
 
4,898
 
4,018
 
3,470
  6,119  
U.S. market share by value   0.44 %   0.46 %   0.46 %   0.48 %   0.53 %   0.57 %   0.56 %   0.58 %   0.64 %
Revenue from top-10 Redfin markets as a percentage of real
estate revenue
  78 %   76 %   73 %   71 %   74 %   72 %   71 %   68 %   69 %
Average number of lead agents   568     621     667     743     756     756     796     935     1,010  
    Three Months Ended
June 30,
  Six Months Ended June 30,
    2016   2017   2016   2017
                 
    (in thousands)
Revenue by segment:                
Brokerage revenue   $ 71,401     $ 95,069     $ 109,388     $ 149,540  
Partner revenue   4,248     5,589     6,618     9,490  
Total real estate revenue   75,649     100,658     116,006     159,030  
Other revenue   2,065     4,277     3,343     5,772  
Total revenue   77,714     104,935     119,349     164,802  
                 
Cost of revenue by segment:                
Real estate cost of revenue   48,293     63,436     85,022     114,592  
Other cost of revenue   2,010     4,539     3,786     6,875  
Total cost of revenue   50,303     67,975     88,808     121,467  
                 
Gross profit by segment:                
Real estate gross profit   27,356     37,222     30,984     44,438  
Other gross profit   55     (262)     (443)     (1,103)  
Total gross profit   $ 27,411     $ 36,960     $ 30,541     $ 43,335