SEATTLE, Aug. 09, 2018 (GLOBE NEWSWIRE) -- Redfin Corporation (NASDAQ: RDFN), the technology-powered residential real estate brokerage, today announced financial results for the second quarter ended June 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 36% year-over-year to $142.6 million during the second quarter. Gross profit was $45.2 million, an increase of 22% from $37.0 million in the second quarter of 2017. Gross margin was 32%, compared to 35% in the second quarter of 2017. Real estate services(1) gross profit was $45.5 million, an increase of 22% from $37.2 million in the second quarter of 2017. Real estate services gross margin was 35%, compared to 37% in the second quarter of 2017. Operating expenses were $42.8 million, an increase of 31% from $32.7 million in the second quarter of 2017. Operating expenses were 30% of revenue, down from 31% in the second quarter of 2017.

Net income was $3.2 million, compared to net income of $4.3 million in the second quarter of 2017. Stock-based compensation was $4.8 million, up from $2.6 million in the second quarter of 2017. Depreciation and amortization was $1.9 million, up from $1.6 million in the second 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 $7.15 in the second 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 $0.06 in the second 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 second quarter of 2018.

"Redfin's share gains again accelerated in the second quarter, with especially strong growth in the number of Redfin listings we sold," said Redfin CEO Glenn Kelman. "We also saw the first improvement in homebuyers' engagement with our agents in nearly three years, a sign that our increased levels of personal service will pay off. We expect U.S. home sales growth to slow and even perhaps reverse in August and September, but believe Redfin will continue to gain share at a high rate because of our service quality and pricing, as well as consumers' increasing Redfin awareness. And finally, we've again expanded the portfolio of services we offer our customers, by committing to a long-term expansion of Redfin Now, our business of buying homes from their owners, and selling those homes on our own account."

Highlights

  • Reached market share of .83% of U.S. existing home sales by value in the second quarter of 2018. Redfin’s second-quarter market share increased .19 percentage points year over year, an acceleration from the .15 percentage-point year-over-year increase in the first quarter. This gain shows continued acceleration of market-share gains from 2017, which saw year-over-year increases of .10 percentage points in the first quarter, .11 in the second, .14 in the third, and .15 in the fourth quarter.(3)
  • Increased the percentage of Redfin transactions from repeat customers and personally referred customers by 35% in the second quarter compared to the second quarter of 2017. These customers closed at more than double the rate of those we met directly from the website.
  • Outperformed competitors in retaining buy-side customers as sellers. Customers who bought a home with Redfin were 69% more likely to sell that home with Redfin, compared to traditional-brokerage buyers selling with the same brokerage. In 2016, Redfin buyers were just 42% more likely to sell that home with Redfin compared to the industry average, showing a widening advantage in customer loyalty.
  • Earned a Net Promoter Score ("NPS"), a measure of customer satisfaction, that was 50% higher than competing brokerages’, as measured in a Redfin-commissioned May 2018 survey of people who bought or sold a home in the previous 12 months. In the May 2017 survey, Redfin’s NPS was just 32% better than other brokerages, so the gap is widening. This was the sixth consecutive survey in which Redfin’s customer satisfaction was higher than our competitors’.
  • Introduced a new Home Values tab on all Redfin city and neighborhood pages. Redfin.com users can click on the Home Values tab to see price trends, recently sold homes, information about offers in the area, school rankings, and Walk Score. Home Values pages provide information to consumers while building future website traffic through high-ranking real estate search terms.
  • Expanded Redfin Mortgage to Georgia and Ohio, now serving homebuyers in seven states and Washington D.C., with plans to launch in additional states in the coming months. Redfin Mortgage is part of the long-term vision of integrating lending with Redfin's existing brokerage and title businesses, ultimately leading to an entirely digital closing.

(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. 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 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 August 9, 2018, and are subject to substantial uncertainty.

For the third quarter of 2018 we expect:

  • Total revenue between $137.1 million and $141.3 million, representing year-over-year growth between 25% and 29% compared to the third quarter of 2017. Properties segment revenue between $10.1 million and $12.0 million is included in the guidance provided.
  • Net income between $1.2 million and $2.8 million, compared to net income of $10.6 million in the third quarter of 2017. This guidance includes approximately $5.6 million of expected stock-based compensation, $2.0 million of expected depreciation and amortization, and $1.6 million of interest expense from the convertible notes issued in July 2018.

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 future operating results included 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. 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 June 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

Jani Strand or 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 June 30, Six Months Ended June 30,
 2018 2017 2018 2017
        
Revenue$142,642  $104,935  $222,536  $164,802 
Cost of revenue (1)97,429  67,975  171,626  121,467 
Gross profit45,213  36,960  50,910  43,335 
Operating expenses:       
Technology and development (1)13,033  10,090  25,796  19,762 
Marketing (1)14,435  10,132  27,770  20,591 
General and administrative (1)15,288  12,466  32,062  26,833 
     Total operating expenses42,756  32,688  85,628  67,186 
Income (loss) from operations2,457  4,272  (34,718) (23,851)
Interest income and other income, net:       
Interest income729  32  1,307  76 
Other income, net21    179  13 
    Total interest income and other income, net750  32  1,486  89 
Net income (loss)$3,207  $4,304  $(33,232) $(23,762)
Accretion of redeemable convertible preferred stock$  $(110,921) $  $(135,690)
Net income (loss) attributable to common stock - basic and diluted$3,207  $(106,617) $(33,232) $(159,452)
Net income (loss) per share attributable to common stock - basic$0.04  $(7.15) $(0.40) $(10.74)
Net income (loss) per share attributable to common stock - diluted$0.04  $(7.15) $(0.40) $(10.74)
Weighted average shares - basic83,164,670  14,913,234  82,590,979  14,840,759 
Weighted average shares - diluted90,743,178  14,913,234  82,590,979  14,840,759 
            

(1) Includes stock-based compensation as follows:

    
 Three Months Ended June 30, Six Months Ended June 30,
 2018 2017 2018 2017
        
Cost of revenue1,392  699  2,691  1,414 
Technology and development1,726  751  3,200  1,482 
Marketing157  123  276  242 
General and administrative1,503  1,065  2,808  2,182 
Total4,778  2,638  8,975  5,320 
 


Redfin Corporation and Subsidiaries

Condensed Consolidated Balance Sheets
(in thousands, except share and per share amounts)

 June 30, 2018 December 31, 2017
 (unaudited)  
    
Assets:   
Current assets:   
Cash and cash equivalents$194,237  $208,342 
Restricted cash17,408  4,316 
Prepaid expenses3,337  8,613 
Accrued revenue, net18,902  13,334 
Inventory14,519  3,382 
Other current assets1,828  328 
Loans held for sale3,584  1,891 
  Total current assets253,815  240,206 
Property and equipment, net23,855  22,318 
Intangible assets, net3,050  3,294 
Goodwill9,186  9,186 
Other assets7,077  6,951 
  Total assets:296,983  281,955 
Liabilities and stockholders' equity:   
Current liabilities:   
Accounts payable3,855  1,901 
Accrued liabilities34,045  26,605 
Other payables17,700  4,068 
Loan facility3,492  2,016 
Current portion of deferred rent1,467  1,267 
  Total current liabilities60,559  35,857 
Deferred rent, net of current portion10,811  10,668 
  Total liabilities71,370  46,525 
Commitments and contingencies   
Stockholders’ equity:   
Common stock—par value $0.001 per share; 500,000,000 shares authorized; 83,785,251 and
81,468,891 shares issued and outstanding, respectively
84  81 
Preferred stock—par value $0.001 per share; 10,000,000 shares authorized and no
shares issued and outstanding
   
Additional paid-in capital387,764  364,352 
Accumulated deficit(162,235) (129,003)
Total stockholders’ equity225,613  235,430 
Total liabilities and stockholders’ equity:$296,983  $281,955 
 


Redfin Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows
(unaudited, in thousands)

  
 Six Months Ended June 30,
 2018 2017
    
Operating activities   
Net loss$(33,232) $(23,762)
Adjustments to reconcile net loss to net cash used in operating activities:   
Depreciation and amortization3,902  3,539 
Stock-based compensation8,974  5,320 
Change in assets and liabilities:   
     Prepaid expenses5,277  1,842 
     Accrued revenue(5,568) (3,885)
     Inventories(11,137) (1,582)
     Other current assets(1,470) 8,064 
     Other long-term assets(125) 377 
     Accounts payable1,934  901 
     Accrued liabilities7,481  8,481 
     Deferred lease liability(583) 1,097 
     Origination of loans held for sale(29,249) (3,022)
     Proceeds from sale of loans originated as held for sale27,555  2,477 
         Net cash used in operating activities(26,241) (153)
Investing activities   
Maturities and sales of short-term investments  1,239 
Purchases of short-term investments  (992)
Purchases of property and equipment(4,045) (9,435)
         Net cash used in investing activities(4,045) (9,188)
Financing activities   
Proceeds from issuance of common stock14,394  1,017 
Tax payment related to net share settlements on restricted stock units(227)  
Payment of initial public offering costs  (1,807)
Borrowings from warehouse credit facilities28,551  2,932 
Repayments of warehouse credit facilities(27,076) (2,403)
Other payables - customer escrow deposits related to title services13,631  7,814 
         Net cash provided by financing activities29,273  7,553 
Net change in cash, cash equivalents, and restricted cash(1,013) (1,788)
Cash, cash equivalents, and restricted cash:   
Beginning of period212,658  67,845 
End of period$211,645  $66,057 
Supplemental disclosure of non-cash investing and financing activities   
Accretion of redeemable convertible preferred stock$  $(135,690)
Stock-based compensation capitalized in property and equipment$(244) $(131)
Initial public offering cost accruals$  $(343)
Property and equipment additions in accounts payable and accrued expenses$(21) $ 
Leasehold improvements paid directly by lessor$(926) $(104)
Cash in transit for exercised stock options$(30) $ 
      


Redfin Corporation and Subsidiaries

Supplemental Financial Information and Business Metrics
(unaudited)

  
 Three Months Ended
 Jun. 30,
2018
 Mar. 31,
2018
 Dec. 31,
2017
 Sep. 30,
2017
 Jun. 30,
2017
 Mar. 31,
2017
 Dec. 31,
2016
 Sep. 30,
2016
 Jun. 30,
2016
                  
Monthly average visitors (in thousands)28,777  25,820  21,377  24,518  24,400  20,162  16,058  17,795  17,021 
Real estate services transactions:                 
Brokerage12,971  7,285  8,598  10,527  10,221  5,692  6,432  7,934  7,497 
Partner3,289  2,237  2,739  3,101  2,874  2,041  2,281  2,663  2,602 
Total16,260  9,522  11,337  13,628  13,095  7,733  8,713  10,597  10,099 
                  
Real estate services revenue per transaction:                 
Brokerage$9,510  $9,628  $9,659  $9,289  $9,301  $9,570  $9,428  $9,333  $9,524 
Partner2,281  2,137  2,056  1,960  1,945  1,911  1,991  1,932  1,633 
Aggregate$8,048  $7,869  $7,822  $7,621  $7,687  $7,548  $7,481  $7,474  $7,491 
                  
Aggregate home value of real estate services transactions (in millions)$7,910  $4,424  $5,350  $6,341  $6,119  $3,470  $4,018  $4,898  $4,684 
U.S. market share by value0.83% 0.73% 0.71% 0.71% 0.64% 0.58% 0.56% 0.57% 0.53%
Revenue from top-10 Redfin markets as a percentage of real estate services revenue68% 66% 69% 69% 69% 68% 71% 72% 74%
Average number of lead agents1,415  1,327  1,118  1,028  1,010  935  796  756  756 
                           


Redfin Corporation and Subsidiaries

Supplemental Financial Information
(unaudited, in thousands)

    
 Three Months Ended June 30, Six Months Ended June 30,
 2018 2017 2018 2017
        
Revenue by segment:       
Brokerage revenue$123,355  $95,069  $193,498  $149,540 
Partner revenue7,503  5,589  12,285  9,490 
Total real estate services revenue130,858  100,658  205,783  159,030 
Properties revenue$8,986  $1,981  $12,038  $1,981 
Other revenue$2,798  $2,296  $4,715  $3,791 
Total revenue$142,642  $104,935  $222,536  $164,802 
        
Cost of revenue by segment:       
Real estate services cost of revenue85,337  63,436  153,501  114,592 
Properties cost of revenue9,088  2,030  12,430  2,036 
Other cost of revenue3,004  2,509  5,695  4,839 
Total cost of revenue$97,429  $67,975  $171,626  $121,467 
        
Gross profit by segment:       
Real estate services gross profit$45,521  $37,222  52,282  44,438 
Properties gross profit(102) (49) (392) (55)
Other gross profit(206) (213) (980) (1,048)
Total gross profit$45,213  $36,960  $50,910  $43,335 
 


Redfin Corporation and Subsidiaries

Reconciliation of GAAP to non-GAAP Financial Measures
(unaudited, in thousands, except share and per share amounts)

    
 Three Months Ended
June 30,
 Six Months Ended
June 30,
 2018* 2017 2018* 2017
        
Net income (loss) attributable to common stock, as reported$3,207  $(106,617) $(33,232) $(159,452)
Adjustments:       
Add-back: Accretion of redeemable convertible preferred stock  110,921    135,690 
Net income (loss) attributable to common stock, adjusted$3,207  $4,304  $(33,232) $(23,762)
Non-GAAP adjusted net income (loss) per share - basic$0.04  $0.06  $(0.40) $(0.34)
Non-GAAP adjusted net income (loss) per share - diluted$0.04  $0.06  $(0.40) $(0.34)
Weighted-average shares used to compute non-GAAP adjusted net income (loss)
per share — basic
83,164,670  70,335,236  82,590,979  70,262,761 
Weighted-average shares used to compute non-GAAP adjusted net income (loss)
per share — diluted
90,743,178  74,177,876  82,590,979  70,262,761 
        
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
83,164,670  14,913,234  82,590,979  14,840,759 
        
Conversion of redeemable convertible preferred stock as of beginning of period
presented
  55,422,002    55,422,002 
Weighted-average shares used to compute non-GAAP adjusted net income
(loss) per share — basic
83,164,670  70,335,236  82,590,979  70,262,761 
        
Weighted-average shares used to compute GAAP net income (loss) per share
attributable to common stockholders — diluted
90,743,178  14,913,234  82,590,979  14,840,759 
        
Conversion of redeemable convertible preferred stock as of beginning of period
presented
  55,422,002    55,422,002 
Incremental options to purchase common stock  3,842,640     
Weighted-average shares used to compute non-GAAP adjusted net income
(loss) per share — diluted
90,743,178  74,177,876  82,590,979  70,262,761 
 

*  All amounts for 2018 are presented on a GAAP basis and included for comparative purposes.