Redfin Reports Fourth Quarter and Full Year 2022 Financial Results

SEATTLE--(BUSINESS WIRE)--Redfin Corporation (NASDAQ: RDFN) today announced results for its fourth quarter and full year ended December 31, 2022.

Fourth Quarter 2022

Fourth quarter revenue was $479.7 million, a decrease of 25% compared to the fourth quarter of 2021. Gross profit was $37.4 million, a decrease of 65% year-over-year. Real estate services gross profit was $26.3 million, a decrease of 65% year-over-year, and real estate services gross margin was 18%, compared to 33% in the fourth quarter of 2021.

Net loss was $61.9 million, compared to a net loss of $27.0 million in the fourth quarter of 2021. Net loss attributable to common stock was $62.1 million. Net loss per share attributable to common stock, diluted, was $0.57, compared to net loss per share, diluted, of $0.27 in the fourth quarter of 2021.

Full Year 2022

Full year revenue was $2,284.4 million, an increase of 19% year-over-year. Gross profit was $286.1 million, a decrease of 29% year-over-year. Real estate services gross profit was $179.0 million, a decrease of 40% year-over-year, and real estate services gross margin was 23%, compared to 33% in 2021.

Net loss was $321.1 million, compared to a net loss of $109.6 million in 2021. Net loss attributable to common stock was $322.7 million. Net loss per share attributable to common stock, diluted, was $2.99, compared to a net loss per share, diluted, of $1.12 in 2021.

“Redfin in the fourth quarter of 2022 set ourselves up to earn adjusted EBITDA in 2023, which would be an improvement in profits of nearly $200 million, even in a major housing downturn,” said Redfin CEO Glenn Kelman. “We shifted to more digital-margin revenue, lowered expenses, increased our share of online real estate traffic, and improved the quality of our sales force. The discipline to make adjusted EBITDA this year can make us very profitable when the housing market recovers. We also bought $143 million of debt for $84 million in cash. We have either sold or accepted an offer to sell all but 19 of our RedfinNow homes. Our revenues and net income exceeded the guidance we gave investors in our November earnings report.”

Fourth Quarter and Full Year Highlights

Reached market share of 0.76% of U.S. existing home sales by units in the fourth quarter. For the year, Redfin reached a market share of 0.80%, an increase of 3 bps compared to 2021.
Redfin’s mobile apps and website reached nearly 44 million average monthly users in the fourth quarter. For the year, Redfin reached a record of nearly 50 million average monthly users, an increase of 5% compared to 2021.
Brought Redfin agent service to Wilmington, North Carolina and Green Bay, Wisconsin and expanded listing coverage to a total of 98% of the U.S. population.
Maintained momentum in mortgage cross-selling, with 17% attach rates for the fourth quarter which was flat compared to the third quarter of 2022.
Confirmed Redfin sells homes faster and for more money than other brokerages for the 7th year in a row. Nationwide Redfin listings sold about 3 days faster and for $1,800 more than comparable listings from other brokerages according to a third-party study that we commissioned.
Delivered software to improve the customers experience and employee productivity:
- Added energy cost estimates to U.S. home listings, helping consumers understand the full cost of living in a home and allowing homeowners to discover how much they could save by installing solar panels.
- Added zoning and land-use data to U.S. home listings, making it easier for consumers to understand how properties may or may not be used.
- Implemented a new design system for iOS home detail pages that increased homebuyer contact and tour completion rates.
- Improved landlord referral process from Redfin.com to rentals.com, helping retain high-intent prospective landlords.

Business Outlook

The following forward-looking statements reflect Redfin's expectations as of February 16, 2023, and are subject to substantial uncertainty.

For the first quarter of 2023 we expect:

Total revenue between $307 million and $324 million, representing a year-over-year decline between (49)% and (46)% compared to the first quarter of 2022. Included within total revenue are real estate services segment revenue between $122 million and $130 million, properties segment revenue between $108 million to $113 million, rentals revenue between $41 million and $42 million, and mortgage revenue between $29 million and $32 million.
Total net loss is expected to be between $116 million and $105 million, compared to net loss of $91 million in the first quarter of 2022. This guidance includes approximately $45 million in total marketing expenses, $20 million of stock-based compensation, $17 million of depreciation and amortization, $7 million in gains on extinguishment of convertible senior notes and $1 million in restructuring expenses. Adjusted EBITDA loss is expected to be between $84 million and $73 million. Furthermore, we expect to pay a quarterly dividend of 30,640 shares of common stock to our preferred stockholder.

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, 2022, which is 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 Redfin

Redfin (www.redfin.com) is a technology-powered real estate company. We help people find a place to live with brokerage, rentals, lending, title insurance, and renovations services. We sell homes for more money and charge half the fee. We also run the country's #1 real estate brokerage site. Our home-buying customers see homes first with on-demand tours, and our lending and title services help them close quickly. Customers selling a home can have our renovations crew fix up their home to sell for top dollar. Our rentals business empowers millions nationwide to find apartments and houses for rent. Since launching in 2006, we've saved customers more than $1.5 billion in commissions. We serve more than 100 markets across the U.S. and Canada and employ over 5,000 people.

Redfin-F

Redfin Corporation and Subsidiaries Consolidated Balance Sheets (in thousands, except share and per share amounts, unaudited)

	December 31,
	2022			2021
Assets
Current assets
Cash and cash equivalents	$	239,840		$	591,003
Restricted cash		2,406			127,278
Short-term investments		122,259			33,737
Accounts receivable, net of allowances for credit losses of $2,019 and $1,298		54,880			69,594
Inventory		114,273			358,221
Loans held for sale		199,604			35,759
Prepaid expenses		34,506			22,948
Other current assets		8,690			7,524
Total current assets		776,458			1,246,064
Property and equipment, net		55,105			58,671
Right-of-use assets, net		42,032			54,200
Mortgage servicing rights, at fair value		36,261			—
Long-term investments		29,480			54,828
Goodwill		461,349			409,382
Intangible assets, net		162,272			185,929
Other assets, noncurrent		11,247			12,898
Total assets	$	1,574,204		$	2,021,972
Liabilities, mezzanine equity, and stockholders' equity
Current liabilities
Accounts payable	$	11,819		$	12,546
Accrued and other liabilities		109,743			118,122
Warehouse credit facilities		190,509			33,043
Secured revolving credit facility		—			199,781
Convertible senior notes, net		23,431			23,280
Lease liabilities		19,137			15,040
Total current liabilities		354,639			401,812
Lease liabilities, noncurrent		37,298			55,222
Convertible senior notes, net, noncurrent		1,078,157			1,214,017
Deferred tax liabilities		243			1,201
Total liabilities		1,470,337			1,672,252
Series A convertible preferred stock—par value $0.001 per share; 10,000,000 shares authorized; 40,000 and 40,000 shares issued and outstanding at December 31, 2022 and 2021, respectively		39,914			39,868
Stockholders’ equity
Common stock—par value $0.001 per share; 500,000,000 shares authorized; 109,696,178 and 106,308,767 shares issued and outstanding at December 31, 2022 and 2021, respectively		110			106
Additional paid-in capital		757,951			682,084
Accumulated other comprehensive loss		(801	)		(174	)
Accumulated deficit		(693,307	)		(372,164	)
Total stockholders’ equity		63,953			309,852
Total liabilities, mezzanine equity, and stockholders’ equity	$	1,574,204		$	2,021,972

Redfin Corporation and Subsidiaries Consolidated Statements of Comprehensive Loss (in thousands, except share and per share amounts, unaudited)

	Three Months Ended December 31,						Twelve Months Ended December 31,
	2022			2021			2022			2021
Revenue
Service	$	219,121		$	265,992		$	1,081,877		$	1,042,112
Product		260,543			377,065			1,202,565			880,653
Total revenue		479,664			643,057			2,284,442			1,922,765
Cost of revenue⁽¹⁾
Service		163,467			161,780			772,351			648,660
Product		278,762			373,253			1,226,038			870,285
Total cost of revenue		442,229			535,033			1,998,389			1,518,945
Gross profit		37,435			108,024			286,053			403,820
Operating expenses
Technology and development⁽¹⁾		47,041			43,894			196,250			156,718
Marketing⁽¹⁾		24,238			22,397			158,071			138,740
General and administrative⁽¹⁾		62,889			66,962			254,593			218,315
Restructuring and reorganization		21,798			—			40,469			—
Total operating expenses		155,966			133,253			649,383			513,773
Loss from operations		(118,531	)		(25,229	)		(363,330	)		(109,953	)
Interest income		4,691			163			6,639			635
Interest expense		(4,905	)		(3,939	)		(17,745	)		(11,762	)
Income tax benefit (expense)		299			744			(126	)		6,107
Gain on extinguishment of convertible senior notes		57,193			—			57,193			—
Other (expense) income, net		(693	)		1,259			(3,774	)		5,360
Net loss	$	(61,946	)	$	(27,002	)	$	(321,143	)	$	(109,613	)
Dividends on convertible preferred stock		(144	)		(1,394	)		(1,560	)		(7,269	)
Net loss attributable to common stock—basic and diluted	$	(62,090	)	$	(28,396	)	$	(322,703	)	$	(116,882	)
Net loss per share attributable to common stock—basic and diluted	$	(0.57	)	$	(0.27	)	$	(2.99	)	$	(1.12	)
Weighted average shares of common stock—basic and diluted		108,997,415			105,739,395			107,927,464			104,683,460

Net loss	$	(61,946	)	$	(27,002	)	$	(321,143	)	$	(109,613	)
Other comprehensive income
Foreign currency translation adjustments		29			4			94			6
Unrealized (loss) gain on available-for-sale securities		(279	)		217			533			379
Comprehensive loss		(62,196	)		(26,781	)		(320,516	)		(109,228	)

(1) Includes stock-based compensation as follows:

	Three Months Ended December 31,						Twelve Months Ended December 31,
	2022			2021			2022			2021
Cost of revenue	$	4,307		$	3,595		$	15,950		$	13,614
Technology and development		6,572			6,288			29,608			23,275
Marketing		1,069			736			4,093			2,350
General and administrative		4,638			4,667			18,606			15,483
Total	$	16,586		$	15,286		$	68,257		$	54,722

Redfin Corporation and Subsidiaries Consolidated Statements of Cash Flows (in thousands, unaudited)

	Year Ended December 31,
	2022			2021
Operating Activities
Net loss	$	(321,143	)	$	(109,613	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization		64,907			46,906
Stock-based compensation		68,257			54,722
Amortization of debt discount and issuance costs		6,137			4,989
Non-cash lease expense		16,234			11,630
Impairment costs		1,136			—
Net loss on IRLCs, forward sales commitments, and loans held for sale		14,427			815
Change in fair value of mortgage servicing rights, net		(801	)		—
Gain on extinguishment of convertible senior notes		(57,193	)		—
Other		3,791			(4,227	)
Change in assets and liabilities:
Accounts receivable, net		24,411			(7,149	)
Inventory		243,948			(309,063	)
Prepaid expenses and other assets		(5,904	)		(12,248	)
Accounts payable		(2,472	)		3,059
Accrued and other liabilities, deferred tax liabilities, and payroll tax liabilities, noncurrent		(46,454	)		25,791
Lease liabilities		(18,452	)		(13,268	)
Origination of mortgage servicing rights		(3,140	)		—
Proceeds from sale of mortgage servicing rights		1,662			—
Origination of loans held for sale		(3,949,442	)		(986,982	)
Proceeds from sale of loans originated as held for sale		4,000,582			993,070
Net cash provided by (used in) operating activities		40,491			(301,568	)
Investing activities
Purchases of property and equipment		(21,531	)		(27,492	)
Purchases of investments		(182,466	)		(146,274	)
Sales of investments		17,545			98,687
Maturities of investments		99,455			106,773
Cash paid for acquisition, net of cash, cash equivalents, and restricted cash acquired		(97,341	)		(608,000	)
Net cash used in investing activities		(184,338	)		(576,306	)
Financing activities
Proceeds from the issuance of common stock pursuant to employee equity plans		11,528			22,772
Tax payments related to net share settlements on restricted stock units		(7,498	)		(27,066	)
Borrowings from warehouse credit facilities		3,938,265			942,993
Repayments to warehouse credit facilities		(3,989,407	)		(948,979	)
Borrowings from secured revolving credit facility		565,334			624,828
Repayments to secured revolving credit facility		(765,114	)		(448,996	)
Cash paid for secured revolving credit facility issuance costs		(733	)		(527	)
Proceeds from issuance of convertible senior notes, net of issuance costs		—			561,529
Purchases of capped calls related to convertible senior notes		—			(62,647	)
Conversions of convertible senior notes		—			(2,159	)
Principal payments under finance lease obligations		(855	)		(796	)
Repurchases of convertible senior notes		(83,614	)		—
Other financing payables		—			(10,611	)
Net cash (used in) provided by financing activities		(332,094	)		650,341
Effect of exchange rate changes on cash, cash equivalents, and restricted cash		(94	)		(6	)
Net change in cash, cash equivalents, and restricted cash		(476,035	)		(227,539	)
Cash, cash equivalents, and restricted cash:
Beginning of period		718,281			945,820
End of period	$	242,246		$	718,281

Redfin Corporation and Subsidiaries Supplemental Financial Information and Business Metrics (unaudited)

	Three Months Ended
	Dec. 31, 2022			Sep. 30, 2022			Jun. 30, 2022			Mar. 31, 2022			Dec. 31, 2021			Sep. 30, 2021			Jun. 30, 2021			Mar. 31, 2021
Monthly average visitors (in thousands)		43,847			50,785			52,698			51,287			44,665			49,147			48,437			46,202
Real estate services transactions
Brokerage		12,743			18,245			20,565			15,001			19,428			21,929			21,006			14,317
Partner		2,742			3,507			3,983			3,417			4,603			4,755			4,597			3,944
Total		15,485			21,752			24,548			18,418			24,031			26,684			25,603			18,261
Real estate services revenue per transaction
Brokerage	$	10,914		$	11,103		$	11,692		$	11,191		$	10,900		$	11,107		$	11,307		$	10,927
Partner		2,611			2,556			2,851			2,814			2,819			2,990			3,195			3,084
Aggregate		9,444			9,725			10,258			9,637			9,352			9,661			9,850			9,233
U.S. market share by units⁽¹⁾		0.76	%		0.80	%		0.82	%		0.79	%		0.78	%		0.78	%		0.77	%		0.75	%
Revenue from top-10 Redfin markets as a percentage of real estate services revenue		57	%		58	%		59	%		57	%		61	%		62	%		64	%		62	%
Average number of lead agents		2,022			2,293			2,640			2,750			2,485			2,370			2,456			2,277
RedfinNow homes sold		474			530			423			617			600			388			292			171
Revenue per RedfinNow home sold		538,788			550,903			604,120			608,851			622,519			599,963			571,670			525,765
Mortgage originations by dollars (in millions)	$	1,036		$	1,557		$	1,565		$	159		$	242		$	258		$	261		$	227
Mortgage originations by units (in ones)		2,631			3,720			3,860			414			591			671			749			632

	Year Ended December 31,
	2022			2021
Monthly average visitors (in thousands)		49,654			47,113
Real estate services transactions
Brokerage		66,554			76,680
Partner		13,649			17,899
Total		80,203			94,579
Real estate services revenue per transaction
Brokerage	$	11,269		$	11,076
Partner		2,718			3,020
Aggregate		9,814			9,551
U.S. market share by units⁽¹⁾		0.80	%		0.77	%
Revenue from top-10 markets as a percentage of real estate services revenue		58	%		62	%
Average number of lead agents		2,426			2,396
RedfinNow homes sold		2,044			1,451
Revenue per RedfinNow home sold	$	576,599		$	594,268
Mortgage originations by dollars (in millions)	$	4,317		$	988
Mortgage originations by units (in ones)		10,625			2,643
(1) Prior to the second quarter of 2022, we reported our U.S. market share based on the aggregate home value of our real estate services transactions, relative to the aggregate value of all U.S. home sales, which we computed based on the mean sale price of U.S. homes provided by the National Association of REALTORS® (“NAR”). Beginning in the second quarter of 2022, NAR (1) revised its methodology of computing the mean sale price, (2) restated its previously reported mean sale price beginning from January 2020 (and indicated that previously reported mean sale price prior to January 2020 is not comparable), and (3) discontinued publication of the mean sale price as part of its primary data set. Due to these changes, as of the second quarter of 2022, we report our U.S. market share based on the number of homes sold, rather than the dollar value of homes sold. Our market share by number of homes sold has historically been lower than our market share by dollar value of homes sold. We also stopped reporting the aggregate home value of our real estate services transactions.

Redfin Corporation and Subsidiaries Segment Reporting and Reconciliation of Adjusted EBITDA to Net Income (Loss) (unaudited, in thousands)

	Three Months Ended December 31, 2022
	Real estate services			Properties			Rentals			Mortgage			Other			Corporate Overhead and Intercompany Eliminations			Total
Revenue	$	146,242		$	260,629		$	40,931		$	28,420		$	6,342		$	(2,900	)	$	479,664
Cost of revenue		119,913			278,761			9,647			30,936			5,872			(2,900	)		442,229
Gross profit		26,329			(18,132	)		31,284			(2,516	)		470			—			37,435
Operating expenses
Technology and development		25,052			3,794			15,360			798			616			1,421			47,041
Marketing		8,293			282			14,258			1,364			26			15			24,238
General and administrative		20,594			2,138			23,990			7,633			960			7,574			62,889
Restructuring and reorganization		—			—			—			—			—			21,798			21,798
Total operating expenses		53,939			6,214			53,608			9,795			1,602			30,808			155,966
Loss from operations		(27,610	)		(24,346	)		(22,324	)		(12,311	)		(1,132	)		(30,808	)		(118,531	)
Interest income, interest expense, income tax expense, gain on extinguishment of convertible senior notes, and other expense, net		—			(1,924	)		291			50			88			58,080			56,585
Net loss	$	(27,610	)	$	(26,270	)	$	(22,033	)	$	(12,261	)	$	(1,044	)	$	27,272		$	(61,946	)

	Three Months Ended December 31, 2022
	Real estate services			Properties			Rentals			Mortgage			Other			Corporate Overhead and Intercompany Eliminations			Total
Net loss	$	(27,610	)	$	(26,270	)	$	(22,033	)	$	(12,261	)	$	(1,044	)	$	27,272		$	(61,946	)
Interest income⁽¹⁾		—			(752	)		(23	)		(3,203	)		(88	)		(3,819	)		(7,885	)
Interest expense⁽²⁾		—			2,666			—			2,981			—			2,136			7,783
Income tax expense		—			10			(288	)		(174	)		—			153			(299	)
Depreciation and amortization		4,569			552			10,133			1,013			274			927			17,468
Stock-based compensation⁽³⁾		7,008			528			2,709			1,542			345			4,454			16,586
Acquisition-related costs⁽⁴⁾		—			—			—			—			—			—			—
Restructuring and reorganization⁽⁵⁾		—			—			—			—			—			21,798			21,798
Impairment⁽⁶⁾		—			—			—			—			—			224			224
Gain on extinguishment of convertible senior notes		—			—			—			—			—			(57,193	)		(57,193	)
Adjusted EBITDA	$	(16,033	)	$	(23,266	)	$	(9,502	)	$	(10,102	)	$	(513	)	$	(4,048	)	$	(63,464	)
(1) Interest income includes $3.2 million of interest income related to originated mortgage loans for the three months ended December 31, 2022.
(2) Interest expense includes $2.9 million of interest expense related to our warehouse credit facilities for the three months ended December 31, 2022.
(3) Stock-based compensation consists of expenses related to stock options, restricted stock units, and our employee stock purchase program.
(4) Acquisition-related costs consist of fees for external advisory, legal, and other professional services incurred in connection with our acquisition of other companies.
(5) Restructuring and reorganization expenses primarily consist of personnel-related costs associated with employee terminations, furloughs, or retention due to the restructuring and reorganization activities from our acquisitions of Bay Equity and Rent., and from our June and October 2022 workforce reductions.
(6) Impairment consists of an impairment loss due to subleasing one of our operating leases.

	Three Months Ended December 31, 2021
	Real estate services		Properties			Rentals			Mortgage			Other			Corporate Overhead and Intercompany Eliminations			Total
Revenue	$	224,732	$	377,065		$	38,923		$	3,996		$	3,347		$	(5,006	)	$	643,057
Cost of revenue		149,529		373,105			6,774			6,690			3,941			(5,006	)		535,033
Gross profit		75,203		3,960			32,149			(2,694	)		(594	)		—			108,024
Operating expenses
Technology and development		20,727		3,724			13,876			2,582			990			1,995			43,894
Marketing		11,923		466			9,450			149			104			305			22,397
General and administrative		23,842		2,828			25,530			2,620			823			11,319			66,962
Restructuring and reorganization		—		—			—			—			—			—			—
Total operating expenses		56,492		7,018			48,856			5,351			1,917			13,619			133,253
Loss from operations		18,711		(3,058	)		(16,707	)		(8,045	)		(2,511	)		(13,619	)		(25,229	)
Interest income, interest expense, income tax expense, gain on extinguishment of convertible senior notes, and other expense, net		—		(1,723	)		2,777			1			1			(2,829	)		(1,773	)
Net loss	$	18,711	$	(4,781	)	$	(13,930	)	$	(8,044	)	$	(2,510	)	$	(16,448	)	$	(27,002	)

	Three Months Ended December 31, 2021
	Real estate services		Properties			Rentals			Mortgage			Other			Corporate Overhead and Intercompany Eliminations			Total
Net loss	$	18,711	$	(4,781	)	$	(13,930	)	$	(8,044	)	$	(2,510	)	$	(16,448	)	$	(27,002	)
Interest income⁽¹⁾		—		(2	)		—			(424	)		(1	)		(159	)		(586	)
Interest expense⁽²⁾		—		1,725			—			431			—			2,214			4,370
Income tax expense		—		—			(2,177	)		—			—			1,433			(744	)
Depreciation and amortization		3,583		554			9,307			387			247			525			14,603
Stock-based compensation⁽³⁾		8,963		1,492			994			820			348			2,669			15,286
Adjusted EBITDA	$	31,257	$	(1,012	)	$	(5,806	)	$	(6,830	)	$	(1,916	)	$	(9,766	)	$	5,927
(1) Interest income includes $0.4 million of interest income related to originated mortgage loans for the three months ended December 31, 2021.
(2) Interest expense includes $0.4 million of interest expense related to our warehouse credit facilities for the three months ended December 31, 2021.
(3) Stock-based compensation consists of expenses related to stock options, restricted stock units, and our employee stock purchase program.

Contacts

Investor Relations
Meg Nunnally, 206-576-8610
ir@redfin.com

Public Relations
Mariam Sughayer, 206-876-1322
press@redfin.com

Read full story here

First published on Fri, Feb 17, 2023

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