Redfin Third-Quarter 2019 Revenue up 70% Year-over-Year to $239 Million
SEATTLE - November 6, 2019 - Redfin Corporation (NASDAQ: RDFN) today announced financial results for the third quarter ended September 30, 2019. 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 70% year-over-year to $239 million during the third quarter. Gross profit was $53.4 million, an increase of 26% from $42.3 million in the third quarter of 2018. Real estate services gross profit was $54.1 million, an increase of 26% from $43.0 million in the third quarter of 2018. Real estate services gross margin was 35%, compared to 34% in the third quarter of 2018. Operating expenses were $45.9 million, an increase of 18% from $39.0 million in the third quarter of 2018. Operating expenses were 19% of revenue, down from 28% in the third quarter of 2018.
Net income was $6.8 million, compared to net income of $3.5 million in the third quarter of 2018. Stock-based compensation was $7.5 million, up from $5.5 million in the third quarter of 2018. Depreciation and amortization was $2.6 million, up from $2.2 million in the third quarter of 2018. Interest income was $1.6 million and interest expense was $2.3 million, compared to $1.8 million and $1.6 million, respectively, in the third quarter of 2018.
Net income per share, basic and diluted, was $0.07, compared to net income per share, basic and diluted, of $0.04 in the third quarter of 2018.
"Redfin's third quarter was strong across the board, with accelerating revenues and year-over-year gross-margin gains in every one of our businesses," said Redfin CEO Glenn Kelman. "We’re investing more in better service, but also in disruptive technologies that let people tour and buy homes without an agent. We’ve expanded instant offers for homeowners from six to ten markets, and are now showing homebuyers the commissions that a seller is offering their agent. These are big strides toward our long-term goal of redefining real estate in the consumers’ favor.”
Highlights
| • | Reached market share of 0.96% of U.S. existing home sales by value in the third quarter of 2019, an increase of 0.02 percentage points from the second quarter of 2019, and an increase of 0.11 percentage points from the third quarter of 2018.(1) |
| • | Continued to drive strong traffic growth, with visitors to our website and mobile application increasing by 22% over the third quarter of 2018. |
| • | Saved Redfin homebuyers and sellers over $57 million in the third quarter, compared to a 2.5% commission typically charged by traditional agents. |
| • | Expanded RedfinNow to Austin, Houston, and San Antonio, TX. As of the end of the third quarter, RedfinNow was also available in Denver, CO, Dallas, TX, Los Angeles, San Diego, Inland Empire, and Orange County, CA. |
1
| • | Launched Redfin Direct in Northern Virginia, allowing unrepresented homebuyers to make offers on Redfin listings using a step-by-step online tool, which in turn can help Redfin sellers save money in buyer agent commission fees. During the third quarter, our listings received 68 Direct offers, resulting in 18 closings. |
| • | Launched Direct Access for RedfinNow listings in Austin, Denver and our Southern California markets. Direct Access makes it easy for buyers to tour RedfinNow listings on their own with their smartphone. |
| • | Redfin Home Services rolled out a fleet of Redfin-branded vans for our renovation superintendents, further streamlining the process of getting homes ready for the market. |
| • | Launched a referral partnership with Opendoor in Atlanta and Phoenix to give more Redfin customers the chance to compare a cash offer to listing with a Redfin agent. Homesellers in these markets can now request an Opendoor offer through Redfin’s website and mobile application. |
| • | Expanded Fast Offers technology to Redfin agents in California, making it simple for agents to prepare offer paperwork for clients even on a mobile device. The software is now available in 33 markets. |
| • | In an effort to arm consumers with as much information as possible, Redfin is now displaying the commission offered to the buyer's agent for homes listed by Redfin. |
(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 6, 2019, and are subject to substantial uncertainty.
For the fourth quarter of 2019 we expect:
| • | Total revenue between $211 million and $220 million, representing year-over-year growth between 70% and 77% compared to the fourth quarter of 2018. Properties segment revenue between $80 million and $85 million is included in the guidance provided. |
| • | Net loss between $12.8 million and $9.5 million, compared to net loss of $12.2 million in the fourth quarter of 2018. This guidance includes approximately $7.6 million of expected stock-based compensation and $2.7 million of expected depreciation and amortization. |
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, 2018, as supplemented by our Quarterly Report for the quarter ended September 30, 2019, 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-
2
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 (www.redfin.com) is a technology-powered residential real estate company. 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 90 markets throughout the United States and Canada. 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 2018, we have helped customers buy or sell more than 170,000 homes worth more than $85 billion.
Redfin-F
Contacts
Investor Relations
Elena Perron, 206-576-8610
Public Relations
Mariam Sughayer, 206-876-1322
3
Redfin Corporation and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income (Loss)
(in thousands, except share and per share amounts, unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||
| Revenue | |||||||||||||||
| Service | $ | 158,519 | $ | 128,905 | $ | 405,160 | $ | 339,403 | |||||||
| Product | 80,164 | 11,350 | 141,445 | 23,388 | |||||||||||
| Total revenue | 238,683 | 140,255 | 546,605 | 362,791 | |||||||||||
Cost of revenue(1) | |||||||||||||||
| Service | 104,397 | 86,294 | 297,320 | 245,490 | |||||||||||
| Product | 80,909 | 11,656 | 144,807 | 24,086 | |||||||||||
| Total cost of revenue | 185,306 | 97,950 | 442,127 | 269,576 | |||||||||||
| Gross profit | 53,377 | 42,305 | 104,478 | 93,215 | |||||||||||
| Operating expenses | |||||||||||||||
Technology and development(1) | 18,801 | 14,310 | 50,421 | 40,105 | |||||||||||
Marketing(1) | 8,361 | 8,236 | 68,611 | 36,006 | |||||||||||
General and administrative(1) | 18,779 | 16,470 | 57,881 | 48,532 | |||||||||||
| Total operating expenses | 45,941 | 39,016 | 176,913 | 124,643 | |||||||||||
| Income (loss) from operations | 7,436 | 3,289 | (72,435 | ) | (31,428 | ) | |||||||||
| Interest income | 1,576 | 1,775 | 5,804 | 3,082 | |||||||||||
| Interest expense | (2,274 | ) | (1,610 | ) | (6,564 | ) | (1,610 | ) | |||||||
| Other income, net | 44 | 21 | 172 | 200 | |||||||||||
| Net income (loss) | $ | 6,782 | $ | 3,475 | $ | (73,023 | ) | $ | (29,756 | ) | |||||
| Net income (loss) per share - basic | $ | 0.07 | $ | 0.04 | $ | (0.80 | ) | $ | (0.35 | ) | |||||
| Net income (loss) per share - diluted | $ | 0.07 | $ | 0.04 | $ | (0.80 | ) | $ | (0.35 | ) | |||||
| Weighted average shares - basic | 91,994,731 | 87,743,223 | 91,279,086 | 84,327,266 | |||||||||||
| Weighted average shares - diluted | 97,171,270 | 94,642,463 | 91,279,086 | 84,327,266 | |||||||||||
| Net income (loss) | $ | 6,782 | $ | 3,475 | $ | (73,023 | ) | $ | (29,756 | ) | |||||
| Other comprehensive income: | |||||||||||||||
| Foreign currency translation adjustments | (10 | ) | — | 28 | — | ||||||||||
| Unrealized loss on available-for-sale securities | (8 | ) | — | (2 | ) | — | |||||||||
| Total comprehensive income (loss) | $ | 6,764 | $ | 3,475 | $ | (72,997 | ) | $ | (29,756 | ) | |||||
(1) Includes stock-based compensation as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||
| Cost of revenue | $ | 1,605 | $ | 1,370 | $ | 4,398 | $ | 4,061 | |||||||
| Technology and development | 3,320 | 2,135 | 8,661 | 5,335 | |||||||||||
| Marketing | 390 | 155 | 1,025 | 431 | |||||||||||
| General and administrative | 2,195 | 1,838 | 5,708 | 4,646 | |||||||||||
| Total | $ | 7,510 | $ | 5,498 | $ | 19,792 | $ | 14,473 | |||||||
4
Redfin Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except share and per share amounts, unaudited)
| September 30, 2019 | December 31, 2018 | ||||||
| Assets | |||||||
| Current assets | |||||||
| Cash and cash equivalents | $ | 209,234 | $ | 432,608 | |||
| Restricted cash | 9,984 | 6,446 | |||||
| Short-term investments | 62,054 | — | |||||
| Accrued revenue, net | 24,434 | 15,363 | |||||
| Inventory | 105,460 | 22,694 | |||||
| Loans held for sale | 22,246 | 4,913 | |||||
| Prepaid expenses | 8,391 | 11,916 | |||||
| Other current assets | 5,763 | 2,307 | |||||
| Total current assets | 447,566 | 496,247 | |||||
| Property and equipment, net | 37,560 | 25,187 | |||||
| Right-of-use assets, net | 45,513 | — | |||||
| Long-term investments | 38,480 | — | |||||
| Goodwill and intangibles, net | 11,626 | 11,992 | |||||
| Other non-current assets | 11,240 | 9,395 | |||||
| Total assets | $ | 591,985 | $ | 542,821 | |||
| Liabilities and stockholders' equity | |||||||
| Current liabilities | |||||||
| Accounts payable | $ | 3,173 | $ | 2,516 | |||
| Accrued liabilities | 50,867 | 30,837 | |||||
| Other payables | 7,157 | 6,544 | |||||
| Borrowings under warehouse credit facilities | 21,987 | 4,733 | |||||
| Current operating lease liabilities | 9,731 | — | |||||
| Current portion of deferred rent | 132 | 1,588 | |||||
| Total current liabilities | 93,047 | 46,218 | |||||
| Non-current operating lease liabilities | 53,059 | — | |||||
| Deferred rent | — | 11,079 | |||||
| Convertible senior notes, net | 118,158 | 113,586 | |||||
| Total liabilities | 264,264 | 170,883 | |||||
| Commitments and contingencies | |||||||
| Stockholders’ equity | |||||||
| Common stock—par value $0.001 per share; 500,000,000 shares authorized; 92,212,316 and 90,151,341 shares issued and outstanding, respectively | 92 | 90 | |||||
| Additional paid-in capital | 571,607 | 542,829 | |||||
| Accumulated other comprehensive income | 26 | — | |||||
| Accumulated deficit | (244,004 | ) | (170,981 | ) | |||
| Total stockholders’ equity | 327,721 | 371,938 | |||||
| Total liabilities and stockholders’ equity | $ | 591,985 | $ | 542,821 | |||
5
Redfin Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands, unaudited)
| Nine Months Ended September 30, | |||||||
| 2019 | 2018 | ||||||
| Operating activities | |||||||
| Net loss | $ | (73,023 | ) | $ | (29,756 | ) | |
| Adjustments to reconcile net loss to net cash used in operating activities: | |||||||
| Depreciation and amortization | 6,366 | 6,123 | |||||
| Stock-based compensation | 19,792 | 14,472 | |||||
| Amortization of debt discount and issuance costs | 4,674 | 1,128 | |||||
| Non-cash lease expense | 4,727 | — | |||||
| Other | (401 | ) | — | ||||
| Change in assets and liabilities: | |||||||
| Accrued revenue | (9,071 | ) | 80 | ||||
| Inventory | (82,766 | ) | (21,779 | ) | |||
| Prepaid expenses and other assets | (82 | ) | 1,808 | ||||
| Accounts payable | 579 | 702 | |||||
| Accrued liabilities and other payables | 18,994 | 11,357 | |||||
| Operating lease liabilities | (5,207 | ) | — | ||||
| Deferred rent | 112 | (913 | ) | ||||
| Origination of loans held for sale | (285,182 | ) | (56,157 | ) | |||
| Proceeds from sale of loans originated as held for sale | 267,850 | 52,127 | |||||
| Net cash used in operating activities | (132,638 | ) | (20,808 | ) | |||
| Investing activities | |||||||
| Purchases of property and equipment | (12,821 | ) | (5,528 | ) | |||
| Purchases of investments | (106,063 | ) | — | ||||
| Sales of investments | 1,005 | — | |||||
| Maturities of investments | 4,900 | — | |||||
| Net cash used in investing activities | (112,979 | ) | (5,528 | ) | |||
| Financing activities | |||||||
| Proceeds from the issuance of shares resulting from employee equity plans | 10,869 | 17,314 | |||||
| Tax payments related to net share settlements on restricted stock units | (2,856 | ) | (705 | ) | |||
| Borrowings from warehouse credit facilities | 280,129 | 54,806 | |||||
| Repayments of warehouse credit facilities | (262,875 | ) | (51,031 | ) | |||
| Other payables - deposits held in escrow | 637 | 7,684 | |||||
| Proceeds from issuance of convertible notes, net of issuance costs | — | 138,953 | |||||
| Proceeds from follow on offering | — | 107,593 | |||||
| Cash paid for debt issuance costs | (152 | ) | — | ||||
| Net cash provided by financing activities | 25,752 | 274,614 | |||||
| Effect of exchange rate changes on cash and cash equivalents | 28 | — | |||||
| Net change in cash, cash equivalents, and restricted cash | (219,837 | ) | 248,278 | ||||
| Cash, cash equivalents, and restricted cash: | |||||||
| Beginning of period | 439,055 | 212,658 | |||||
| End of period | $ | 219,218 | $ | 460,936 | |||
6
Redfin Corporation and Subsidiaries
Supplemental Financial Information and Business Metrics
(unaudited)
| Three Months Ended | |||||||||||||||||||||||||||||||||||
| Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | |||||||||||||||||||||||||||
| Monthly average visitors (in thousands) | 35,633 | 36,557 | 31,107 | 25,212 | 29,236 | 28,777 | 25,820 | 21,377 | 24,518 | ||||||||||||||||||||||||||
| Real estate services transactions | |||||||||||||||||||||||||||||||||||
| Brokerage | 16,098 | 15,580 | 8,435 | 9,822 | 12,876 | 12,971 | 7,285 | 8,598 | 10,527 | ||||||||||||||||||||||||||
| Partner | 3,499 | 3,357 | 2,125 | 2,749 | 3,333 | 3,289 | 2,237 | 2,739 | 3,101 | ||||||||||||||||||||||||||
| Total | 19,597 | 18,937 | 10,560 | 12,571 | 16,209 | 16,260 | 9,522 | 11,337 | 13,628 | ||||||||||||||||||||||||||
| Real estate services revenue per transaction | |||||||||||||||||||||||||||||||||||
| Brokerage | $ | 9,075 | $ | 9,332 | $ | 9,640 | $ | 9,569 | $ | 9,227 | $ | 9,510 | $ | 9,628 | $ | 9,659 | $ | 9,289 | |||||||||||||||||
| Partner | 2,295 | 2,218 | 2,153 | 2,232 | 2,237 | 2,281 | 2,137 | 2,056 | 1,960 | ||||||||||||||||||||||||||
| Aggregate | 7,865 | 8,071 | 8,134 | 7,964 | 7,790 | 8,048 | 7,869 | 7,822 | 7,621 | ||||||||||||||||||||||||||
| Aggregate home value of real estate services transactions (in millions) | $ | 9,157 | $ | 8,986 | $ | 4,800 | $ | 5,825 | $ | 7,653 | $ | 7,910 | $ | 4,424 | $ | 5,350 | $ | 6,341 | |||||||||||||||||
| U.S. market share by value | 0.96 | % | 0.94 | % | 0.83 | % | 0.81 | % | 0.85 | % | 0.83 | % | 0.73 | % | 0.71 | % | 0.71 | % | |||||||||||||||||
| Revenue from top-10 Redfin markets as a percentage of real estate services revenue | 63 | % | 64 | % | 64 | % | 66 | % | 66 | % | 68 | % | 66 | % | 69 | % | 69 | % | |||||||||||||||||
| Average number of lead agents | 1,579 | 1,603 | 1,503 | 1,419 | 1,397 | 1,415 | 1,327 | 1,118 | 1,028 | ||||||||||||||||||||||||||
7
Redfin Corporation and Subsidiaries
Supplemental Financial Information
(unaudited, in thousands)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||
| Revenue by segment | |||||||||||||||
| Brokerage revenue | $ | 146,096 | $ | 118,809 | $ | 372,809 | $ | 312,306 | |||||||
| Partner revenue | 8,030 | 7,456 | 20,053 | 19,741 | |||||||||||
| Total real estate services revenue | 154,126 | 126,265 | 392,862 | 332,047 | |||||||||||
| Properties revenue | 80,164 | 11,350 | 141,445 | 23,388 | |||||||||||
| Other revenue | 5,161 | 2,691 | 13,490 | 7,407 | |||||||||||
| Intercompany elimination | (768 | ) | (51 | ) | (1,192 | ) | (51 | ) | |||||||
| Total revenue | 238,683 | 140,255 | 546,605 | 362,791 | |||||||||||
| Cost of revenue | |||||||||||||||
| Real estate services | $ | 100,048 | $ | 83,274 | $ | 284,447 | $ | 236,775 | |||||||
| Properties | 80,909 | 11,656 | 144,807 | 24,086 | |||||||||||
| Other | 5,117 | 3,071 | 14,065 | 8,766 | |||||||||||
| Intercompany elimination | (768 | ) | (51 | ) | (1,192 | ) | (51 | ) | |||||||
| Total cost of revenue | $ | 185,306 | $ | 97,950 | $ | 442,127 | $ | 269,576 | |||||||
| Gross profit by segment | |||||||||||||||
| Real estate services | $ | 54,078 | $ | 42,991 | $ | 108,415 | $ | 95,272 | |||||||
| Properties | (745 | ) | (306 | ) | (3,362 | ) | (698 | ) | |||||||
| Other | 44 | (380 | ) | (575 | ) | (1,359 | ) | ||||||||
| Total gross profit | $ | 53,377 | $ | 42,305 | $ | 104,478 | $ | 93,215 | |||||||
8