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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2024
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___ to ___
Commission file number 001-38160
(Exact name of registrant as specified in its charter)
| | | | | | | | | | | | | | |
Delaware | | 74-3064240 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
| | |
1099 Stewart Street | Suite 600 | | |
Seattle | WA | | 98101 |
(Address of Principal Executive Offices) | | (Zip Code) |
| | | | | |
(206) | 576-8333 |
Registrant's telephone number, including area code |
| | |
|
(Former name, former address and former fiscal year, if changed since last report) |
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
Title of each class | Trading Symbol | Name of each exchange on which registered |
Common Stock, $0.001 par value per share | RDFN | The Nasdaq Global Select Market |
| | | | | | | | | | | | | | |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. | | | | |
☒ | Yes | ☐ | No |
| | | | | | | | | | | | | | |
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). | | | | |
☒ | Yes | ☐ | No |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
| | | | | | | | | | | |
Large accelerated filer | ☒ | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
| | Emerging growth company | ☐ |
| | | | | | | | | | | | | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | | |
☐ | |
| | | | | | | | | | | | | | |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). | | | | |
☐ | Yes | ☒ | No |
The registrant had 121,774,260 shares of common stock outstanding as of August 1, 2024.
Redfin Corporation
Quarterly Report on Form 10-Q
For the Quarter Ended June 30, 2024
Table of Contents
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PART I | | Page |
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Item 1. | | |
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Item 2. | | |
Item 3. | | |
Item 4. | | |
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PART II | | |
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Item 1 | | |
Item 1A. | | |
Item 5. | | |
Item 6. | | |
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As used in this quarterly report, the terms "Redfin," "we," "us," and "our" refer to Redfin Corporation and its subsidiaries taken as a whole, unless otherwise noted or unless the context indicates otherwise. However, when referencing (i) the 2023 notes, the 2025 notes, and the 2027 notes, the terms “we,” “us,” and “our” refer only to Redfin Corporation and not to Redfin Corporation and its subsidiaries taken as a whole, (ii) the Apollo term loan, the terms “we,” “us,” and “our” refer only to Redfin Corporation and its subsidiaries except for Bay Equity LLC, taken as a whole, and (ii) each warehouse credit facility, the terms "we," "us," and "our" refer to Bay Equity LLC.
Note Regarding Forward-Looking Statements
This quarterly report contains forward-looking statements. All statements contained in this report other than statements of historical fact, including statements regarding our future operating results and financial position, our business strategy and plans, our market growth and trends, and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “could,” “would,” “project,” “plan,” "hope,” “potentially,” “preliminary,” “likely,” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including those described under Item 1A of our annual report for the year ended December 31, 2023, as supplemented by Part II, Item 1A of this report. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the effect of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the future events and trends discussed in this report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Accordingly, you should not rely on forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, performance, or events and circumstances reflected in the forward-looking statements will be achieved or occur. We undertake no obligation to update any of these forward-looking statements for any reason after the date of this report or to conform these statements to actual results or revised expectations.
Note Regarding Industry and Market Data
This quarterly report contains information using industry publications that generally state that the information contained therein has been obtained from sources believed to be reliable, but such information may not be accurate or complete. While we are not aware of any misstatements regarding the information from these industry publications, we have not independently verified any of the data from third-party sources nor have we ascertained the underlying economic assumptions relied on therein.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Redfin Corporation and Subsidiaries
Consolidated Balance Sheets
(in thousands, except share and per share amounts, unaudited)
| | | | | | | | | | | |
| June 30, 2024 | | December 31, 2023 |
Assets | | | |
Current assets | | | |
Cash and cash equivalents | $ | 201,812 | | | $ | 149,759 | |
Restricted cash | 756 | | | 1,241 | |
Short-term investments | — | | | 41,952 | |
Accounts receivable, net of allowances for credit losses of $4,677 and $3,234 | 75,522 | | | 51,738 | |
Loans held for sale | 208,460 | | | 159,587 | |
Prepaid expenses | 28,002 | | | 33,296 | |
Other current assets | 9,872 | | | 7,472 | |
| | | |
Total current assets | 524,424 | | | 445,045 | |
Property and equipment, net | 45,303 | | | 46,431 | |
Right-of-use assets, net | 28,389 | | | 31,763 | |
Mortgage servicing rights, at fair value | 2,695 | | | 32,171 | |
Long-term investments | — | | | 3,149 | |
Goodwill | 461,349 | | | 461,349 | |
Intangible assets, net | 108,832 | | | 123,284 | |
Other assets, noncurrent | 10,492 | | | 10,456 | |
| | | |
Total assets | $ | 1,181,484 | | | $ | 1,153,648 | |
Liabilities, mezzanine equity, and stockholders' (deficit) equity | | | |
Current liabilities | | | |
Accounts payable | $ | 11,612 | | | $ | 10,507 | |
Accrued and other liabilities | 125,082 | | | 90,360 | |
Warehouse credit facilities | 202,559 | | | 151,964 | |
| | | |
Lease liabilities | 14,123 | | | 15,609 | |
| | | |
Total current liabilities | 353,376 | | | 268,440 | |
Lease liabilities, noncurrent | 25,193 | | | 29,084 | |
Convertible senior notes, net, noncurrent | 571,077 | | | 688,737 | |
| | | |
Term loan | 243,961 | | | 124,416 | |
Deferred tax liabilities | 642 | | | 264 | |
| | | |
Total liabilities | 1,194,249 | | | 1,110,941 | |
Commitments and contingencies (Note 7) | | | |
Series A convertible preferred stock—par value $0.001 per share; 10,000,000 shares authorized; 40,000 shares issued and outstanding at June 30, 2024 and December 31, 2023 | 39,981 | | | 39,959 | |
Stockholders’ (deficit) equity | | | |
Common stock—par value $0.001 per share; 500,000,000 shares authorized; 121,743,620 and 117,372,171 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively | 122 | | | 117 | |
Additional paid-in capital | 865,263 | | | 826,146 | |
Accumulated other comprehensive loss | (144) | | | (182) | |
Accumulated deficit | (917,987) | | | (823,333) | |
Total stockholders’ (deficit) equity | (52,746) | | | 2,748 | |
Total liabilities, mezzanine equity, and stockholders’ (deficit) equity | $ | 1,181,484 | | | $ | 1,153,648 | |
See Notes to the consolidated financial statements.
Redfin Corporation and Subsidiaries
Consolidated Statements of Comprehensive Loss
(in thousands, except share and per share amounts, unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
Revenue | $ | 295,203 | | | $ | 275,556 | | | $ | 520,682 | | | $ | 489,639 | |
Cost of revenue | 185,617 | | | 175,366 | | | 340,284 | | | 331,311 | |
Gross profit | 109,586 | | | 100,190 | | | 180,398 | | | 158,328 | |
Operating expenses | | | | | | | |
Technology and development | 42,215 | | | 47,141 | | | 88,644 | | | 94,804 | |
Marketing | 40,260 | | | 33,033 | | | 65,138 | | | 73,436 | |
General and administrative | 54,705 | | | 61,765 | | | 122,578 | | | 131,204 | |
Restructuring and reorganization | 1,334 | | | 6,106 | | | 2,223 | | | 7,159 | |
Total operating expenses | 138,514 | | | 148,045 | | | 278,583 | | | 306,603 | |
Loss from continuing operations | (28,928) | | | (47,855) | | | (98,185) | | | (148,275) | |
Interest income | 1,461 | | | 2,704 | | | 3,293 | | | 6,110 | |
Interest expense | (6,086) | | | (1,766) | | | (10,960) | | | (3,688) | |
Income tax expense | (559) | | | (233) | | | (387) | | | (643) | |
Gain on extinguishment of convertible senior notes | 6,314 | | | 20,083 | | | 12,000 | | | 62,353 | |
Other expense, net | (82) | | | (145) | | | (415) | | | (379) | |
Net loss from continuing operations | (27,880) | | | (27,212) | | | (94,654) | | | (84,522) | |
Net loss from discontinued operations | — | | | (146) | | | — | | | (3,634) | |
Net loss | $ | (27,880) | | | $ | (27,358) | | | $ | (94,654) | | | $ | (88,156) | |
| | | | | | | |
Dividends on convertible preferred stock | (191) | | | (297) | | | (424) | | | (523) | |
| | | | | | | |
| | | | | | | |
Net loss from continuing operations attributable to common stock—basic and diluted | $ | (28,071) | | | $ | (27,509) | | | $ | (95,078) | | | $ | (85,045) | |
Net loss attributable to common stock—basic and diluted | $ | (28,071) | | | $ | (27,655) | | | $ | (95,078) | | | $ | (88,679) | |
| | | | | | | |
Net loss from continuing operations per share attributable to common stock—basic and diluted | $ | (0.23) | | | $ | (0.25) | | | $ | (0.80) | | | $ | (0.77) | |
Net loss attributable to common stock per share—basic and diluted | $ | (0.23) | | | $ | (0.25) | | | $ | (0.80) | | | $ | (0.80) | |
| | | | | | | |
Weighted-average shares to compute net loss per share attributable to common stock—basic and diluted | 120,393,897 | | | 111,678,417 | | | 119,379,082 | | | 110,895,358 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Net loss | $ | (27,880) | | | $ | (27,358) | | | $ | (94,654) | | | $ | (88,156) | |
Other comprehensive income (loss) | | | | | | | |
Foreign currency translation adjustments | 1 | | | — | | | (2) | | | (58) | |
Unrealized (loss) gain on available-for-sale debt securities | — | | | (17) | | | 40 | | | 407 | |
Comprehensive loss | $ | (27,879) | | | $ | (27,375) | | | $ | (94,616) | | | $ | (87,807) | |
See Notes to the consolidated financial statements.
Redfin Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands, unaudited)
| | | | | | | | | | | |
| Six Months Ended June 30, |
| 2024 | | 2023 |
Operating Activities | | | |
Net loss | $ | (94,654) | | | $ | (88,156) | |
Adjustments to reconcile net loss to net cash provided by operating activities: | | | |
Depreciation and amortization | 23,855 | | | 34,146 | |
Stock-based compensation | 35,640 | | | 36,582 | |
Amortization of debt discount and issuance costs | 1,372 | | | 2,029 | |
Non-cash lease expense | 6,164 | | | 9,578 | |
Impairment costs | — | | | 113 | |
Net gain on IRLCs, forward sales commitments, and loans held for sale | (2,196) | | | (4,565) | |
Change in fair value of mortgage servicing rights, net | (944) | | | 599 | |
Gain on extinguishment of convertible senior notes | (12,000) | | | (62,353) | |
Other | 380 | | | (1,794) | |
Change in assets and liabilities: | | | |
Accounts receivable, net | (23,928) | | | (14,069) | |
Inventory | — | | | 114,232 | |
Prepaid expenses and other assets | 2,100 | | | 8,868 | |
Accounts payable | 1,135 | | | 2,812 | |
Accrued and other liabilities, deferred tax liabilities, and payroll tax liabilities, noncurrent | 35,360 | | | (4,522) | |
Lease liabilities | (8,116) | | | (10,790) | |
Origination of mortgage servicing rights | (84) | | | (579) | |
Proceeds from sale of mortgage servicing rights | 30,503 | | | 738 | |
Origination of loans held for sale | (1,989,240) | | | (1,922,690) | |
Proceeds from sale of loans originated as held for sale | 1,940,725 | | | 1,888,706 | |
Net cash used in operating activities | (53,928) | | | (11,115) | |
Investing activities | | | |
Purchases of property and equipment | (6,795) | | | (6,213) | |
Purchases of investments | — | | | (76,866) | |
Sales of investments | 39,225 | | | 65,099 | |
Maturities of investments | 6,395 | | | 59,383 | |
| | | |
Net cash provided by investing activities | 38,825 | | | 41,403 | |
Financing activities | | | |
| | | |
| | | |
Proceeds from the issuance of common stock pursuant to employee equity plans | 2,158 | | | 5,665 | |
Tax payments related to net share settlements on restricted stock units | (940) | | | (11,096) | |
Borrowings from warehouse credit facilities | 1,987,822 | | | 1,920,487 | |
Repayments to warehouse credit facilities | (1,937,227) | | | (1,883,196) | |
| | | |
| | | |
| | | |
Principal payments under finance lease obligations | (46) | | | (53) | |
Repurchases of convertible senior notes | (106,953) | | | (183,019) | |
| | | |
Repayment of term loan principal | (938) | | | — | |
| | | |
Payments of debt issuance costs | (2,203) | | | — | |
Proceeds from term loan | 125,000 | | | — | |
| | | |
Net cash provided by (used in) financing activities | 66,673 | | | (151,212) | |
Effect of exchange rate changes on cash, cash equivalents, and restricted cash | (2) | | | (58) | |
Net change in cash, cash equivalents, and restricted cash | 51,568 | | | (120,982) | |
Cash, cash equivalents, and restricted cash: | | | |
Beginning of period(1) | 151,000 | | | 242,246 | |
End of period(2) | $ | 202,568 | | | $ | 121,264 | |
| | | |
Supplemental disclosure of cash flow information | | | |
Cash paid for interest | $ | 13,417 | | | $ | 8,370 | |
Non-cash transactions | | | |
Stock-based compensation capitalized in property and equipment | 2,263 | | | 2,204 | |
Property and equipment additions in accounts payable and accrued liabilities | 23 | | | 64 | |
| | | |
(1) Cash, cash equivalents, and restricted cash consisted of the following (beginning of period):
| | | | | | | | | | | |
| As of December 31, |
| 2023 | | 2022 |
Continuing operations | | | |
Cash and cash equivalents | $ | 149,759 | | | $ | 232,200 | |
Restricted cash | 1,241 | | | 2,406 | |
Total | 151,000 | | | 234,606 | |
Discontinued operations | | | |
Cash and cash equivalents | — | | | 7,640 | |
Restricted cash | — | | | — | |
Total | — | | | 7,640 | |
Total cash, cash equivalents, and restricted cash | $ | 151,000 | | | $ | 242,246 | |
(2) Cash, cash equivalents, and restricted cash consisted of the following (end of period):
| | | | | | | | | | | |
| As of June 30, |
| 2024 | | 2023 |
Continuing operations | | | |
Cash and cash equivalents | $ | 201,812 | | | $ | 118,776 | |
Restricted cash | 756 | | | 2,377 | |
Total | 202,568 | | | 121,153 | |
Discontinued operations | | | |
Cash and cash equivalents | — | | | 111 | |
Restricted cash | — | | | — | |
Total | — | | | 111 | |
Total cash, cash equivalents, and restricted cash | $ | 202,568 | | | $ | 121,264 | |
See Notes to the consolidated financial statements.
Redfin Corporation and Subsidiaries
Consolidated Statements of Changes in Mezzanine Equity and Stockholders’ (Deficit) Equity
(in thousands, except share amounts, unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Series A Convertible Preferred Stock | | | Common Stock | | Additional Paid-in Capital | | Accumulated Deficit | | Accumulated Other Comprehensive Loss | | Total Stockholders' (Deficit) Equity |
| Shares | | Amount | | | Shares | | Amount | | | | |
Balance, March 31, 2024 | 40,000 | | | $ | 39,970 | | | | 119,440,241 | | | $ | 119 | | | $ | 844,383 | | | $ | (890,107) | | | $ | (145) | | | $ | (45,750) | |
Issuance of convertible preferred stock, net | — | | | 11 | | | | — | | | — | | | — | | | — | | | — | | | — | |
Issuance of common stock as dividend on convertible preferred stock | — | | | — | | | | 30,640 | | | — | | | — | | | — | | | — | | | — | |
Issuance of common stock pursuant to employee stock purchase program | — | | | — | | | | 386,301 | | | — | | | 1,974 | | | — | | | — | | | 1,974 | |
Issuance of common stock pursuant to exercise of stock options | — | | | — | | | | 14,215 | | | — | | | 91 | | | — | | | — | | | 91 | |
Issuance of common stock pursuant to settlement of restricted stock units | — | | | — | | | | 1,930,743 | | | 3 | | | (3) | | | — | | | — | | | — | |
Common stock surrendered for employees' tax liability upon settlement of restricted stock units | — | | | — | | | | (58,520) | | | — | | | (411) | | | — | | | — | | | (411) | |
Stock-based compensation | — | | | — | | | | — | | | — | | | 19,229 | | | — | | | — | | | 19,229 | |
Other comprehensive income | — | | | — | | | | — | | | — | | | — | | | — | | | 1 | | | 1 | |
Net loss | — | | | — | | | | — | | | — | | | — | | | (27,880) | | | — | | | (27,880) | |
Balance, June 30, 2024 | 40,000 | | | $ | 39,981 | | | | 121,743,620 | | | $ | 122 | | | $ | 865,263 | | | $ | (917,987) | | | $ | (144) | | | $ | (52,746) | |
| | | | | | | | | | | | | | | | |
Balance, March 31, 2023 | 40,000 | | | $ | 39,925 | | | | 110,526,884 | | | $ | 110 | | | $ | 775,094 | | | $ | (754,105) | | | $ | (435) | | | $ | 20,664 | |
Issuance of convertible preferred stock, net | — | | | 11 | | | | — | | | — | | | — | | | — | | | — | | | — | |
Issuance of common stock as dividend on convertible preferred stock | — | | | — | | | | 30,640 | | | — | | | — | | | — | | | — | | | — | |
Issuance of common stock pursuant to employee stock purchase program | — | | | — | | | | 1,150,703 | | | 1 | | | 4,214 | | | — | | | — | | | 4,215 | |
Issuance of common stock pursuant to exercise of stock options | — | | | — | | | | 545,127 | | | 2 | | | 1,310 | | | — | | | — | | | 1,312 | |
Issuance of common stock pursuant to settlement of restricted stock units | — | | | — | | | | 2,412,813 | | | 2 | | | (2) | | | — | | | — | | | — | |
Common stock surrendered for employees' tax liability upon settlement of restricted stock units | — | | | — | | | | (731,494) | | | (1) | | | (7,936) | | | — | | | — | | | (7,937) | |
Stock-based compensation | — | | | — | | | | — | | | — | | | 18,622 | | | — | | | — | | | 18,622 | |
Other comprehensive loss | — | | | — | | | | — | | | — | | | — | | | — | | | (17) | | | (17) | |
Net loss | — | | | — | | | | — | | | — | | | — | | | (27,358) | | | — | | | (27,358) | |
Balance, June 30, 2023 | 40,000 | | | $ | 39,936 | | | | 113,934,673 | | | $ | 114 | | | $ | 791,302 | | | $ | (781,463) | | | $ | (452) | | | $ | 9,501 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Series A Convertible Preferred Stock | | | Common Stock | | Additional Paid-in Capital | | Accumulated Deficit | | Accumulated Other Comprehensive Loss | | Total Stockholders' (Deficit) Equity |
| Shares | | Amount | | | Shares | | Amount | | | | |
Balance, December 31, 2023 | 40,000 | | | $ | 39,959 | | | | 117,372,171 | | | $ | 117 | | | $ | 826,146 | | | $ | (823,333) | | | $ | (182) | | | $ | 2,748 | |
Issuance of convertible preferred stock, net | — | | | 22 | | | | — | | | — | | | — | | | — | | | — | | | — | |
Issuance of common stock as dividend on convertible preferred stock | — | | | — | | | | 61,280 | | | — | | | — | | | — | | | — | | | — | |
Issuance of common stock pursuant to employee stock purchase program | — | | | — | | | | 386,301 | | | — | | | 1,974 | | | — | | | — | | | 1,974 | |
Issuance of common stock pursuant to exercise of stock options | — | | | — | | | | 29,548 | | | — | | | 185 | | | — | | | — | | | 185 | |
Issuance of common stock pursuant to settlement of restricted stock units | — | | | — | | | | 4,030,126 | | | 5 | | | (5) | | | — | | | — | | | — | |
Common stock surrendered for employees' tax liability upon settlement of restricted stock units | — | | | — | | | | (135,806) | | | — | | | (940) | | | — | | | — | | | (940) | |
Stock-based compensation | — | | | — | | | | — | | | — | | | 37,903 | | | — | | | — | | | 37,903 | |
Other comprehensive income | — | | | — | | | | — | | | — | | | — | | | — | | | 38 | | | 38 | |
Net loss | — | | | — | | | | — | | | — | | | — | | | (94,654) | | | — | | | (94,654) | |
Balance, June 30, 2024 | 40,000 | | | $ | 39,981 | | | | 121,743,620 | | | $ | 122 | | | $ | 865,263 | | | $ | (917,987) | | | $ | (144) | | | $ | (52,746) | |
| | | | | | | | | | | | | | | | |
Balance, December 31, 2022 | 40,000 | | | $ | 39,914 | | | | 109,696,178 | | | $ | 110 | | | $ | 757,951 | | | $ | (693,307) | | | $ | (801) | | | $ | 63,953 | |
Issuance of convertible preferred stock, net | — | | | 22 | | | | — | | | — | | | — | | | — | | | — | | | — | |
Issuance of common stock as dividend on convertible preferred stock | — | | | — | | | | 61,280 | | | — | | | — | | | — | | | — | | | — | |
Issuance of common stock pursuant to employee stock purchase program | — | | | — | | | | 1,150,703 | | | 1 | | | 4,214 | | | — | | | — | | | 4,215 | |
Issuance of common stock pursuant to exercise of stock options | — | | | — | | | | 563,164 | | | — | | | 1,450 | | | — | | | — | | | 1,450 | |
Issuance of common stock pursuant to settlement of restricted stock units | — | | | — | | | | 3,568,639 | | | 4 | | | (4) | | | — | | | — | | | — | |
Common stock surrendered for employees' tax liability upon settlement of restricted stock units | — | | | — | | | | (1,105,291) | | | (1) | | | (11,095) | | | — | | | — | | | (11,096) | |
Stock-based compensation | — | | | — | | | | — | | | — | | | 38,786 | | | — | | | — | | | 38,786 | |
Other comprehensive income | — | | | — | | | | — | | | — | | | — | | | — | | | 349 | | | 349 | |
Net loss | — | | | — | | | | — | | | — | | | — | | | (88,156) | | | — | | | (88,156) | |
Balance, June 30, 2023 | 40,000 | | | $ | 39,936 | | | | 113,934,673 | | | $ | 114 | | | $ | 791,302 | | | $ | (781,463) | | | $ | (452) | | | $ | 9,501 | |
See Notes to the consolidated financial statements.
Index to Notes to Consolidated Financial Statements
| | | | | | | | |
Note 1: | | |
Note 2: | | |
Note 3: | | |
Note 4: | | |
Note 5: | | |
Note 6: | | |
Note 7: | | |
Note 8: | | |
Note 9: | | |
Note 10: | | |
Note 11: | | |
Note 12: | | |
Note 13: | | |
Note 14: | | |
| | |
Redfin Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts, unaudited)
Note 1: Summary of Accounting Policies
Basis of Presentation—The consolidated financial statements and accompanying notes have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”).
The financial information as of December 31, 2023 that is included in this quarterly report is derived from the audited consolidated financial statements and notes for the year ended December 31, 2023 included in Item 8 in our annual report for the year ended December 31, 2023. Such financial information should be read in conjunction with the notes and management’s discussion and analysis of the consolidated financial statements included in our annual report.
The unaudited consolidated interim financial statements, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, necessary to present fairly our financial position as of June 30, 2024, our statements of comprehensive loss, and statements of changes in mezzanine equity and stockholders’ (deficit) equity for the three and six months ended June 30, 2024 and 2023, as well as our statements of cash flows for the six months ended June 30, 2024 and 2023. The results for the three and six months ended June 30, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or for any interim period or for any other future year.
Principles of Consolidation—The unaudited consolidated interim financial statements include the accounts of Redfin Corporation and our wholly owned subsidiaries. Intercompany transactions and balances have been eliminated.
Use of Estimates—The preparation of consolidated financial statements, in conformity with GAAP, requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and results of operations during the respective periods. Our estimates include, but are not limited to, valuation of deferred income taxes, stock-based compensation, capitalization of website and software development costs, the incremental borrowing rate for the determination of the present value of lease payments, recoverability of intangible assets with finite lives, fair value of our mortgage loans held for sale (“LHFS”) and mortgage servicing rights, estimated useful life of intangible assets, fair value of reporting units for purposes of allocating and evaluating goodwill for impairment, and current expected credit losses on certain financial assets. The amounts ultimately realized from the affected assets or ultimately recognized as liabilities will depend on, among other factors, general business conditions and could differ materially in the near term from the carrying amounts reflected in the consolidated financial statements.
Recently Adopted Accounting Pronouncements—In September 2023, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance under ASU 2023-07, Segment Reporting - Improvements to Reportable Segment Disclosures. The ASU improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments in this ASU are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. We are currently evaluating the impact of this standard on our segment disclosures.
Recently Issued Accounting Pronouncements—In December 2023, the FASB issued authoritative guidance under ASU 2023-09, Income Taxes - Improvements to Income Tax Disclosures. The ASU enhances annual income tax disclosures to address investor requests for more information about the tax risks and opportunities present in an entity’s worldwide operations. The two primary enhancements disaggregate existing income tax disclosures related to the effective tax rate reconciliation and income taxes paid. The amendments in this ASU are effective for annual periods beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the potential impact of the guidance on our financial statement disclosures.
Note 2: Discontinued Operations
In November 2022, our management and board of directors made the decision to wind down RedfinNow. The financial results of RedfinNow have historically been included in our properties segment. Winding-down RedfinNow was a strategic decision we made in order to focus our resources on our core businesses in the face of the rising cost of capital. The wind-down of our properties segment was complete as of June 30, 2023, at which time it met the criteria for discontinued operations in our consolidated financial statements.
As of June 30, 2024 and December 31, 2023 there were no major classes of assets and liabilities of our discontinued operations remaining.
The major classes of line items of the discontinued operations included in our consolidated statement of comprehensive loss were as follows for the three and six months ended June 30, 2023:
| | | | | | | | | | | | | |
| | | Three Months Ended June 30, 2023 | | Six Months Ended June 30, 2023 |
Revenue | | | $ | 10,998 | | | $ | 122,576 | |
Cost of revenue | | | 10,913 | | | 124,422 | |
Gross profit | | | 85 | | | (1,846) | |
Operating expenses | | | | | |
Technology and development | | | 23 | | | 552 | |
Marketing | | | 18 | | | 523 | |
General and administrative | | | 115 | | | 638 | |
Restructuring and reorganization | | | 75 | | | 75 | |
Total operating expenses | | | 231 | | | 1,788 | |
Loss from discontinued operations | | | (146) | | | (3,634) | |
Interest income, interest expense, income tax expense, and other expense, net | | | — | | | — | |
| | | | | |
| | | | | |
| | | | | |
Net loss from discontinued operations | | | $ | (146) | | | $ | (3,634) | |
| | | | | |
Net loss from discontinued operations per share—basic and diluted | | | $ | 0.00 | | | $ | (0.03) | |
Significant non-cash items and capital expenditures of the discontinued operations were as follows for the six months ended June 30, 2023:
| | | | | | | |
| | | |
| | | |
Stock-based compensation | | | $ | 234 | |
Depreciation and amortization | | | 89 | |
| | | |
| | | |
Charges specifically relating to the wind-down of our properties segment were as follows:
| | | | | | | | | | | | | | | | | |
Cost type | Financial statement line item | | Six Months Ended June 30, 2023 | | Cumulative amount recognized as of June 30, 2023 |
Employee termination costs | Restructuring and reorganization | | $ | 539 | | | $ | 8,587 | |
Asset write-offs | Restructuring and reorganization | | — | | | 493 | |
Other | Restructuring and reorganization | | (465) | | | (890) | |
Acceleration of debt issuance costs | Interest expense | | — | | | 481 | |
Total | | | $ | 74 | | | $ | 8,671 | |
Note 3: Segment Reporting and Revenue
In its operation of our business, our management, including our chief operating decision maker ("CODM"), who is also our chief executive officer, evaluates the performance of our operating segments based on revenue, gross profit, operating income, and net income. We do not analyze discrete segment balance sheet information related to long-term assets, substantially all of which are located in the United States. We have five operating segments and three reportable segments, real estate services, rentals, and mortgage.
We generate revenue primarily from commissions and fees charged on each real estate services transaction closed by our lead agents or partner agents, from subscription-based product offerings for our rentals business, and from the origination, sales, and servicing of mortgages. Our key revenue components are brokerage revenue, partner revenue, rentals revenue, mortgage revenue, and other revenue.
Information on each of our reportable and other segments and reconciliation to net (loss) income from continuing operations is presented in the tables below. We have assigned certain previously reported expenses to each segment to conform to the way we internally manage and monitor our business. We allocated indirect costs to each segment based on a reasonable allocation methodology, when such costs are significant to the performance measures of the segments.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, 2024 |
| Real estate services | | Rentals | | Mortgage | | Other | | Corporate overhead | | Total |
Revenue | $ | 187,569 | | | $ | 50,927 | | | $ | 40,179 | | | $ | 16,528 | | | $ | — | | | $ | 295,203 | |
Cost of revenue | 133,863 | | | 11,630 | | | 32,528 | | | 7,596 | | | — | | | 185,617 | |
Gross profit | 53,706 | | | 39,297 | | | 7,651 | | | 8,932 | | | — | | | 109,586 | |
Operating expenses | | | | | | | | | | | |
Technology and development | 28,920 | | | 10,417 | | | 700 | | | 965 | | | 1,213 | | | 42,215 | |
Marketing | 23,855 | | | 15,749 | | | 648 | | | 8 | | | — | | | 40,260 | |
General and administrative | 19,140 | | | 20,242 | | | 6,519 | | | 910 | | | 7,894 | | | 54,705 | |
Restructuring and reorganization | — | | | — | | | — | | | — | | | 1,334 | | | 1,334 | |
Total operating expenses | 71,915 | | | 46,408 | | | 7,867 | | | 1,883 | | | 10,441 | | | 138,514 | |
(Loss) income from continuing operations | (18,209) | | | (7,111) | | | (216) | | | 7,049 | | | (10,441) | | | (28,928) | |
Interest income, interest expense, income tax expense, gain on extinguishment of convertible senior notes, and other expense, net | 14 | | | (42) | | | 1 | | | 180 | | | 895 | | | 1,048 | |
Net (loss) income from continuing operations | $ | (18,195) | | | $ | (7,153) | | | $ | (215) | | | $ | 7,229 | | | $ | (9,546) | | | $ | (27,880) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, 2023 |
| Real estate services | | Rentals | | Mortgage | | Other | | Corporate overhead | | Total |
Revenue(1) | $ | 180,641 | | | $ | 45,356 | | | $ | 38,426 | | | $ | 11,133 | | | $ | — | | | $ | 275,556 | |
Cost of revenue | 124,447 | | | 10,427 | | | 34,266 | | | 6,226 | | | — | | | 175,366 | |
Gross profit | 56,194 | | | 34,929 | | | 4,160 | | | 4,907 | | | — | | | 100,190 | |
Operating expenses | | | | | | | | | | | |
Technology and development | 28,044 | | | 16,304 | | | 734 | | | 1,118 | | | 941 | | | 47,141 | |
Marketing | 16,004 | | | 15,938 | | | 1,054 | | | 16 | | | 21 | | | 33,033 | |
General and administrative | 20,961 | | | 25,305 | | | 6,724 | | | 1,044 | | | 7,731 | | | 61,765 | |
Restructuring and reorganization | — | | | — | | | — | | | — | | | 6,106 | | | 6,106 | |
Total operating expenses | 65,009 | | | 57,547 | | | 8,512 | | | 2,178 | | | 14,799 | | | 148,045 | |
(Loss) income from continuing operations | (8,815) | | | (22,618) | | | (4,352) | | | 2,729 | | | (14,799) | | | (47,855) | |
Interest income, interest expense, income tax expense, gain on extinguishment of convertible senior notes, and other expense, net | — | | | 28 | | | (91) | | | 153 | | | 20,553 | | | 20,643 | |
Net (loss) income from continuing operations | $ | (8,815) | | | $ | (22,590) | | | $ | (4,443) | | | $ | 2,882 | | | $ | 5,754 | | | $ | (27,212) | |
(1) Included in revenue is $95 from providing services to our discontinued properties segment.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, 2024 |
| Real estate services | | Rentals | | Mortgage | | Other | | Corporate overhead | | Total |
Revenue | $ | 318,749 | | | $ | 100,445 | | | $ | 73,998 | | | $ | 27,490 | | | $ | — | | | $ | 520,682 | |
Cost of revenue | 244,777 | | | 23,087 | | | 58,432 | | | 13,988 | | | — | | | 340,284 | |
Gross profit | 73,972 | | | 77,358 | | | 15,566 | | | 13,502 | | | — | | | 180,398 | |
Operating expenses | | | | | | | | | | | |
Technology and development | 57,427 | | | 25,929 | | | 1,356 | | | 1,797 | | | 2,135 | | | 88,644 | |
Marketing | 35,032 | | | 28,537 | | | 1,554 | | | 15 | | | — | | | 65,138 | |
General and administrative | 38,915 | | | 42,720 | | | 13,202 | | | 2,064 | | | 25,677 | | | 122,578 | |
Restructuring and reorganization | — | | | — | | | — | | | — | | | 2,223 | | | 2,223 | |
Total operating expenses | 131,374 | | | 97,186 | | | 16,112 | | | 3,876 | | | 30,035 | | | 278,583 | |
(Loss) income from continuing operations | (57,402) | | | (19,828) | | | (546) | | | 9,626 | | | (30,035) | | | (98,185) | |
Interest income, interest expense, income tax expense, gain on extinguishment of convertible senior notes, and other expense, net | (32) | | | (35) | | | 4 | | | 424 | | | 3,170 | | | 3,531 | |
Net (loss) income from continuing operations | $ | (57,434) | | | $ | (19,863) | | | $ | (542) | | | $ | 10,050 | | | $ | (26,865) | | | $ | (94,654) | |
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| Six Months Ended June 30, 2023 |
| Real estate services | | Rentals | | Mortgage | | Other | | Corporate overhead | | Total |
Revenue(1) | $ | 307,937 | | | $ | 88,226 | | | $ | 74,915 | | | $ | 18,561 | | | $ | — | | | $ | 489,639 | |
Cost of revenue | 235,941 | | | 20,192 | | | 63,479 | | | 11,699 | | | — | | | 331,311 | |
Gross profit | 71,996 | | | 68,034 | | | 11,436 | | | 6,862 | | | — | | | 158,328 | |
Operating expenses | | | | | | | | | | | |
Technology and development | 56,939 | | | 32,268 | | | 1,377 | | | 2,342 | | | 1,878 | | | 94,804 | |
Marketing | 41,064 | | | 30,264 | | | 2,034 | | | 26 | | | 48 | | | 73,436 | |
General and administrative | 40,579 | | | 51,607 | | | 13,653 | | | 2,097 | | | 23,268 | | | 131,204 | |
Restructuring and reorganization | — | | | — | | | — | | | — | | | 7,159 | | | 7,159 | |
Total operating expenses | 138,582 | | | 114,139 | | | 17,064 | | | 4,465 | | | 32,353 | | | 306,603 | |
(Loss) income from continuing operations | (66,586) | | | (46,105) | | | (5,628) | | | 2,397 | | | (32,353) | | | (148,275) | |
Interest income, interest expense, income tax expense, gain on extinguishment of convertible senior notes, and other expense, net | — | | | 73 | | | (151) | | | 268 | | | 63,563 | | | 63,753 | |
Net (loss) income from continuing operations | $ | (66,586) | | | $ | (46,032) | | | $ | (5,779) | | | $ | 2,665 | | | $ | 31,210 | | | $ | (84,522) | |
(1) Included in revenue is $1,244 from providing services to our discontinued properties segment.
Note 4: Financial Instruments
Derivatives
Our primary market exposure is to interest rate risk, specifically U.S. treasury and mortgage interest rates, due to their impact on mortgage-related assets and commitments. We use forward sales commitments on whole loans and mortgage-backed securities to manage and reduce this risk. We do not have any derivative instruments designated as hedging instruments.
Forward Sales Commitments—We are exposed to interest rate and price risk on loans held for sale from the funding date until the date the loan is sold. Forward sales commitments on whole loans and mortgage-backed securities are used to fix the forward sales price that will be realized at the sale of each loan.
Interest Rate Lock Commitments—Interest rate lock commitments ("IRLCs") represent an agreement to extend credit to a mortgage loan applicant. We commit (subject to loan approval) to fund the loan at the specified rate, regardless of changes in market interest rates between the commitment date and the funding date. Outstanding IRLCs are subject to interest rate risk and related price risk during the period from the date of commitment through the loan funding date or expiration date. Loan commitments generally range between 30 and 90 days and the borrower is not obligated to obtain the loan. Therefore, IRLCs are subject to fallout risk, which occurs when approved borrowers choose not to close on the underlying loans. We review our commitment-to-closing ratio ("pull-through rate") as part of an estimate of the number of mortgage loans that will fund according to the IRLCs.
The notional amounts of our forward sales commitments and IRLCs were as follows:
| | | | | | | | | | | | | | |
Instrument | | June 30, 2024 | | December 31, 2023 |
Forward sales commitments | | $ | 435,861 | | | $ | 274,400 | |
IRLCs | | 350,852 | | | 188,554 | |
The locations and amounts of gains (losses) recognized in income related to our derivatives were as follows:
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| | | | Three Months Ended June 30, | | Six Months Ended June 30, |
Instrument | | Classification | | 2024 | | 2023 | | 2024 | | 2023 |
Forward sales commitments | | Revenue | | $ | (470) | | | $ | 2,285 | | | $ | 1,936 | | | $ | 2,032 | |
IRLCs | | Revenue | | (2,624) | | | (5,302) | | | (99) | | | 2,572 | |
Fair Value of Financial Instruments
A summary of assets and liabilities related to our financial instruments, measured at fair value on a recurring basis and as reflected in our consolidated balance sheets, is set forth below:
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| Balance at June 30, 2024 | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
Assets | | | | | | | |
Cash equivalents | | | | | | | |
Money market funds | $ | 148,890 | | | $ | 148,890 | | | $ | — | | | $ | — | |
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Total cash equivalents | 148,890 | | | 148,890 | | | — | | | — | |
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Loans held for sale | 208,460 | | | — | | | 208,460 | | | — | |
Other current assets | | | | | | | |
Forward sales commitments | 1,392 | | | — | | | 1,392 | | | — | |
IRLCs | 4,901 | | | — | | | — | | | 4,901 | |
Total other current assets | 6,293 | | | — | | | 1,392 | | | 4,901 | |
Mortgage servicing rights, at fair value | 2,695 | | | — | | | — | | | 2,695 | |
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Total assets | $ | 366,338 | | | $ | 148,890 | | | $ | 209,852 | | | $ | 7,596 | |
Liabilities | | | | | | | |
Accrued liabilities | | | | | | | |
Forward sales commitments | $ | 1,884 | | | $ | — | | | $ | 1,884 | | | $ | — | |
IRLCs | 548 | | | — | | | — | | | 548 | |
Total liabilities | $ | 2,432 | | | $ | — | | | $ | 1,884 | | | $ | 548 | |
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| Balance at December 31, 2023 | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
Assets | | | | | | | |
Cash equivalents | | | | | | | |
Money market funds | $ | 115,276 | | | $ | 115,276 | | | $ | — | | | $ | |