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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 March 31, 2022
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
Redfin Corporation
(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 classTrading SymbolName of each exchange on which registered
Common Stock, $0.001 par value per shareRDFNThe 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 107,173,678 shares of common stock outstanding as of April 28, 2022.



Redfin Corporation

Quarterly Report on Form 10-Q
For the Quarter Ended March 31, 2022

Table of Contents



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 secured revolving credit facility with Goldman Sachs, the terms "we," "us," and "our" refer only to RedfinNow Borrower LLC, and (iii) each warehouse credit facility, the terms "we," "us," and "our" refer to Redfin Mortgage, LLC or Bay Equity LLC, as the context dictates.

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, 2021, 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.
i

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

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

March 31, 2022December 31, 2021
Assets
Current assets
Cash and cash equivalents$612,680 $591,003 
Restricted cash36,047 127,278 
Short-term investments95,458 33,737 
Accounts receivable, net of allowances for credit losses of $1,464 and $1,298
52,282 69,594 
Inventory245,487 358,221 
Loans held for sale23,693 35,759 
Prepaid expenses26,836 22,948 
Other current assets6,748 7,524 
Total current assets1,099,231 1,246,064 
Property and equipment, net60,836 58,671 
Right-of-use assets, net51,417 54,200 
Long-term investments56,194 54,828 
Goodwill409,382 409,382 
Intangible assets, net177,003 185,929 
Other assets, noncurrent13,090 12,898 
Total assets$1,867,153 $2,021,972 
Liabilities, mezzanine equity, and stockholders' equity
Current liabilities
Accounts payable$22,693 $12,546 
Accrued and other liabilities103,449 118,122 
Warehouse credit facilities22,285 33,043 
Secured revolving credit facility136,869 199,781 
Convertible senior notes, net 23,280 
Lease liabilities15,070 15,040 
Total current liabilities300,366 401,812 
Lease liabilities, noncurrent51,719 55,222 
Convertible senior notes, net, noncurrent1,238,585 1,214,017 
Deferred tax liabilities981 1,201 
Total liabilities1,591,651 1,672,252 
Commitments and contingencies (Note 8)
Series A convertible preferred stock—par value $0.001 per share; 10,000,000 shares authorized; 40,000 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively
39,879 39,868 
Stockholders’ equity
Common stock—par value $0.001 per share; 500,000,000 shares authorized; 107,025,691 and 106,308,767 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively
107 106 
Additional paid-in capital699,225 682,084 
Accumulated other comprehensive loss(739)(174)
Accumulated deficit(462,970)(372,164)
Total stockholders’ equity235,623 309,852 
Total liabilities, mezzanine equity, and stockholders’ equity$1,867,153 $2,021,972 

See Notes to the consolidated financial statements.
1

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

Three Months Ended March 31,
20222021
Revenue
Service$217,593 $175,593 
Product379,753 92,726 
Total revenue597,346 268,319 
Cost of revenue
Service165,809 134,851 
Product358,999 91,110 
Total cost of revenue524,808 225,961 
Gross profit72,538 42,358 
Operating expenses
Technology and development49,640 27,678 
Marketing43,342 11,802 
General and administrative58,966 37,391 
Restructuring and reorganization5,710  
Total operating expenses157,658 76,871 
Loss from operations(85,120)(34,513)
Interest income220 159 
Interest expense(3,861)(1,338)
Income tax expense(134) 
Other expense, net(1,911)(92)
Net loss$(90,806)$(35,784)
Dividends on convertible preferred stock(793)(2,336)
Net loss attributable to common stock—basic and diluted$(91,599)$(38,120)
Net loss per share attributable to common stock—basic and diluted$(0.86)$(0.37)
Weighted-average shares to compute net loss per share attributable to common stock—basic and diluted106,664,140 103,427,764 
Net loss$(90,806)$(35,784)
Other comprehensive income (loss)
Foreign currency translation adjustments4  
Unrealized gain (loss) on available-for-sale debt securities561 (50)
Comprehensive loss$(90,241)$(35,834)

See Notes to the consolidated financial statements.

2

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

Three Months Ended March 31,
20222021
Operating Activities
Net loss
$(90,806)$(35,784)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization14,813 4,341 
Stock-based compensation16,788 12,583 
Amortization of debt discount and issuance costs1,440 855 
Non-cash lease expense3,169 2,533 
Net loss (gain) on IRLCs, forward sales commitments, and loans held for sale60 (1,052)
Other2,290 109 
Change in assets and liabilities:
Accounts receivable, net17,312 7,303 
Inventory112,734 (48,213)
Prepaid expenses and other assets(1,982)(3,359)
Accounts payable9,876 5,947 
Accrued and other liabilities, deferred tax liabilities, and payroll tax liabilities, noncurrent(14,442)8,873 
Lease liabilities (3,642)(2,951)
Origination of loans held for sale(159,186)(227,090)
Proceeds from sale of loans originated as held for sale170,577 225,140 
Net cash provided by (used in) operating activities79,001 (50,765)
Investing activities
Purchases of property and equipment(7,442)(5,285)
Purchases of investments(77,596)(67,877)
Sales of investments5,346  
Maturities of investments6,500 63,589 
Net cash used in investing activities(73,192)(9,573)
Financing activities
Proceeds from the issuance of common stock pursuant to employee equity plans1,887 3,411 
Tax payments related to net share settlements on restricted stock units(2,595)(10,860)
Borrowings from warehouse credit facilities152,386 216,382 
Repayments to warehouse credit facilities(163,144)(214,747)
Borrowings from secured revolving credit facility156,799 71,177 
Repayments to secured revolving credit facility(219,711)(46,275)
Proceeds from issuance of convertible senior notes, net of issuance costs 488,691 
Purchases of capped calls related to convertible senior notes (54,480)
Payments for repurchases and conversions of convertible senior notes (1,886)
Other financing payables 6,521 
Principal payments under finance lease obligations(217)(67)
Cash paid for secured revolving credit facility issuance costs(764)(305)
Net cash (used in) provided by financing activities(75,359)457,562 
Effect of exchange rate changes on cash, cash equivalents, and restricted cash(4)1 
Net change in cash, cash equivalents, and restricted cash(69,554)397,225 
Cash, cash equivalents, and restricted cash:
Beginning of period718,281 945,820 
End of period
$648,727 $1,343,045 
Supplemental disclosure of cash flow information
Cash paid for interest
$3,377 $973 
Non-cash transactions
Stock-based compensation capitalized in property and equipment1,134 732 
Property and equipment additions in accounts payable and accrued liabilities326 2,348 
Leasehold improvements paid directly by lessor 1,334 
As of March 31,
20222021
Reconciliation of cash, cash equivalents, and restricted cash
Cash and cash equivalents$612,680 $1,241,255 
Restricted cash36,047 101,790 
Total cash, cash equivalents, and restricted cash$648,727 $1,343,045 

See Notes to the consolidated financial statements.
3

Redfin Corporation and Subsidiaries
Consolidated Statements of Changes in Mezzanine Equity and Stockholders’ Equity
(in thousands, except share amounts, unaudited)

Series A Convertible Preferred StockCommon StockAdditional Paid-in CapitalAccumulated DeficitAccumulated Other Comprehensive Income/(Loss)Total Stockholders' Equity
SharesAmountSharesAmount
Balance, December 31, 2020
40,000 $39,823 103,000,594 $103 $860,556 $(270,313)$211 $590,557 
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 exercise of stock options— — 670,050 1 3,462 — — 3,463 
Issuance of common stock pursuant to settlement of restricted stock units— — 360,351 — — — — — 
Common stock surrendered for employees' tax liability upon settlement of restricted stock units— — (115,030)— (10,860)— — (10,860)
Cumulative-effect adjustment from accounting changes— — — — (170,240)7,762 — (162,478)
Purchases of capped calls related to convertible senior notes— — — — (54,480)— — (54,480)
Issuance of common stock in connection with conversion of convertible senior notes— — 36,980 — (52)— — (52)
Stock-based compensation— — — — 13,316 — — 13,316 
Other comprehensive loss— — — — — — (50)(50)
Net loss— — — — — (35,784)— (35,784)
Balance, March 31, 2021
40,000 $39,834 103,983,585 $104 $641,702 $(298,335)$161 $343,632 
Balance, December 31, 2021
40,000 $39,868 106,308,767 $106 $682,084 $(372,164)$(174)$309,852 
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 exercise of stock options— — 208,499  1,815 — — 1,815 
Issuance of common stock pursuant to settlement of restricted stock units— — 684,357 1 (1)— —  
Common stock surrendered for employees' tax liability upon settlement of restricted stock units— — (206,572)— (2,595)— — (2,595)
Stock-based compensation— — — — 17,922 — — 17,922 
Other comprehensive loss— — — — — — (565)(565)
Net loss— — — — — (90,806)— (90,806)
Balance, March 31, 2022
40,000 $39,879 107,025,691 $107 $699,225 $(462,970)$(739)$235,623 

See Notes to the consolidated financial statements.
4

Index to Notes to Consolidated Financial Statements

5

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, 2021 that is included in this quarterly report is derived from the audited consolidated financial statements and notes for the year ended December 31, 2021 included in Item 8 in our annual report for the year ended December 31, 2021. 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 March 31, 2022, our statements of comprehensive loss, and statements of changes in mezzanine equity and stockholders’ equity for the three months ended March 31, 2022 and 2021, as well as our statements of cash flows for the three months ended March 31, 2022 and 2021. The results for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 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 its wholly owned subsidiaries, including those entities in which we have a variable interest and of which we are the primary beneficiary. 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, net realizable value of inventory, 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, 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.

Restructuring and Reorganization—Restructuring and reorganization expenses primarily consist of employee termination costs (including severance, retention, benefits, and payroll taxes) for our mortgage and rentals segments due to the restructuring and reorganization activities from our acquisitions of Bay Equity LLC (“Bay Equity”) and RentPath Holdings, Inc., respectively. These expenses are included in restructuring and reorganization in our consolidated statements of comprehensive loss and in accrued and other liabilities in our consolidated balance sheets. We expect to complete the restructuring and reorganization activities by the end of 2022.

Recently Adopted Accounting Pronouncements—None applicable.

6

Recently Issued Accounting Pronouncements—On October 28, 2021, the Financial Accounting Standards Board issued ASU 2021-08—Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which amends ASC 805 to “require acquiring entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination.” Under current GAAP, an acquirer generally recognizes such items at fair value on the acquisition date. As a result of the amendments made by ASU 2021-08, it is expected that an acquirer will generally recognize and measure acquired contract assets and contract liabilities in a manner consistent with how the acquiree recognized and measured them in its pre-acquisition financial statements. The amendments made by ASU 2021-08 are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted, including in interim periods, for any financial statements that have not yet been issued. We elected to early adopt this standard in the second quarter of 2022, and we do not expect any material impact on our financial statements as a result of adopting ASU 2021-08.

Note 2: Business Combinations

On April 2, 2021, we acquired, for $608,000 in cash, all of the equity interests of RentPath Holdings, Inc., as reorganized following an internal restructuring of the entity and certain of its wholly owned subsidiaries (as reorganized, "RentPath" and such acquisition, the "RentPath Acquisition"). In connection with the internal restructuring, certain assets and liabilities related to the business of providing digital media services to clients in the residential real estate business were transferred to RentPath, and the remaining assets and liabilities were transferred to a wind-down company. We acquired RentPath to enter into the real estate rentals market.

The results of operations and the fair values of the assets acquired and liabilities assumed have been included in our consolidated financial statements since the date of acquisition. RentPath is reported in our rentals segment in Note 3. The goodwill recognized in connection with our acquisition of RentPath is primarily attributable to the anticipated synergies from future growth of the combined business and is not expected to be deductible for tax purposes. We assigned the recognized goodwill of $241,045 and $159,151 to the real estate services and rentals segments, respectively.

The following table summarizes the fair value of assets acquired and liabilities assumed as a result of the RentPath Acquisition:

Cash and cash equivalents(1)
$334 
Accounts receivable7,726 
Prepaid expenses5,483 
Other current assets416 
Property and equipment, net3,103 
Operating lease right-of-use assets12,330 
Intangible assets211,000 
Goodwill400,196 
Total assets640,588 
Accounts payable(1,355)
Accrued and other liabilities(1)
(9,412)
Lease liabilities(1,264)
Lease liabilities and deposits, noncurrent(11,066)
Payroll tax liabilities, noncurrent(1,030)
Deferred tax liabilities(8,461)
Total liabilities(32,588)
Total purchase consideration$608,000 

(1) On April 2, 2021, $334 of cash and cash equivalents owed to a wind-down company remained in RentPath's primary operating account due to the timing of bank transfers and wires. The cash and cash equivalents were recorded at fair value along with an offsetting due-to liability on April 2, 2021.

There were no acquisition-related costs associated with the RentPath Acquisition for the three months ended March 31, 2022.

7

Identifiable Intangible AssetsThe following table provides the fair values of the RentPath intangible assets, along with their estimated useful lives:

Estimated Fair ValueEstimated Useful Life
(in years)
Trade names$70,000 10
Developed technology60,500 3
Customer relationships80,500 10
Total211,000 

The identifiable intangible assets include trade names, developed technology (an application platform), and customer relationships. Trade names primarily relate to the RentPath brand. Developed technology relates to the RentPath website and mobile application, which are the primary channels for meeting customers. Customer relationships represent customer contracts existing at the acquisition date. The fair values of trade names, developed technology, and customer relationships are derived by applying the relief from royalty method, replacement cost method, and multi-period excess earnings method, respectively. Critical estimates in valuing the intangible assets include revenue growth rate, royalty rate, discount rate, and number of months to recreate the underlying application.

Unaudited Pro Forma Financial Information—The following table presents unaudited pro forma financial information for the three months ended March 31, 2022 and 2021. The pro forma financial information combines our results of operations with that of RentPath as though the companies had been combined as of January 1, 2020. The pro forma information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the RentPath Acquisition had taken place at such time. The pro forma financial information presented below includes adjustments for bankruptcy costs, depreciation and amortization, provision for income taxes, transaction costs, and interest expense related to debt that would not have been incurred if we had consummated the RentPath Acquisition on January 1, 2020:

Three Months Ended March 31,
20222021
Revenue$597,346 $311,243 
Net loss(90,726)(42,622)

The gross impacts of material non-recurring adjustments made in the pro forma financial information disclosed above were $150 and $71,230 for the three months ended March 31, 2022 and 2021, respectively. These adjustments primarily relate to the reorganization, bankruptcy, and other costs that would not have been incurred if we had consummated the RentPath Acquisition on January 1, 2020 and decreased expense in the periods specified. These adjustments also include an income tax benefit resulting from the RentPath Acquisition, which assumes that we had consummated the RentPath Acquisition on January 1, 2020.

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 and gross profit. We do not analyze discrete segment balance sheet information related to long-term assets, substantially all of which are located in the United States. All other financial information is presented on a consolidated basis. We have six operating segments and four reportable segments, real estate services, properties, rentals, and mortgage. Our CODM evaluates the rentals segment as a stand-alone business; accordingly, we are separately reporting the segment's operating expenses from our consolidated operating expenses. Our mortgage operating segment does not meet the reportable segment quantitative thresholds set forth in ASC 280, but due to our anticipated acquisition of Bay Equity (see Note 16 for details on the closing of our acquisition of Bay Equity), beginning in the fourth quarter of 2021, we moved our mortgage segment from the "other" segment and now present it as a standalone reportable segment. We have reflected this change to the earliest period presented for comparability purposes. These changes had no impact on our previously reported consolidated net revenue, loss from operations, net loss, or net loss per share.

8

We generate revenue primarily from commissions and fees charged on each real estate services transaction closed by our lead agents or partner agents, from the sale of homes, and from subscription-based product offerings for our rentals business. Our key revenue components are brokerage revenue, partner revenue, properties revenue, rentals revenue, mortgage revenue, and other revenue.

Information on each of the reportable and other segments and reconciliation to consolidated net loss is as follows:

Three Months Ended March 31,
20222021
Revenue
Real estate services (brokerage)$167,872 $156,447 
Real estate services (partner)9,615 12,162 
Properties379,753 92,726 
Rentals38,044  
Mortgage2,917 5,711 
Other4,368 3,646 
Intercompany eliminations(5,223)(2,373)
Total$597,346 $268,319 
Cost of revenue
Real estate services$153,784 $128,216 
Properties358,866 91,130 
Rentals7,193  
Mortgage5,517 5,869 
Other4,671 3,119 
Intercompany eliminations(5,223)(2,373)
Total$524,808 $225,961 
Gross profit
Real estate services$23,703 $40,393 
Properties20,887 1,596 
Rentals30,851  
Mortgage(2,600)(158)
Other(303)527 
Total$72,538 $42,358 
Real estate services, properties, mortgage, and other operating expenses$109,781 $76,871 
Rentals operating expenses47,877  
Loss from operations(85,120)(34,513)
Interest income220 159 
Interest expense(3,861)(1,338)
Income tax expense(134) 
Other expense, net(1,911)(92)
Net loss$(90,806)$(35,784)

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.

9

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.

Notional AmountsMarch 31, 2022December 31, 2021
Forward sales commitments$43,260 $70,550 
IRLCs43,283 67,485 

The locations and amounts of gains (losses) recognized in income related to our derivatives are as follows:

Three Months Ended March 31,
InstrumentClassification20222021
Forward sales commitmentsService revenue$1,503 $1,928 
IRLCsService revenue(887)166 

Fair Value of Financial Instruments

In May 2020, we purchased preferred stock of Matterport, Inc. ("Matterport"), then a privately held company. In July 2021, Matterport became a publicly traded company through a business combination transaction with a special purpose acquisition vehicle. In connection with the transaction, we received Matterport's publicly traded Class A common stock in exchange for the preferred stock that we owned. We previously recorded our investment at cost because the preferred stock did not have a readily determinable fair value, but upon receipt of the publicly traded common stock, we recorded our investment at fair value. In January 2022, we sold the Class A common stock and recognized a loss relative to this previously recorded fair value in other expense, net in our consolidated statement of comprehensive loss for the three months ended March 31, 2022. This loss is also included in adjustments to reconcile net loss to net cash used in operating activities, as a component of other, in our consolidated statement of cash flows for the three months ended March 31, 2022.
10


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:

Balance at March 31, 2022Quoted 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$398,651 $398,651 $ $ 
Total cash equivalents398,651 398,651   
Short-term investments
U.S. treasury securities88,555 88,555   
Agency bonds6,903 6,903   
Loans held for sale23,693  23,693  
Other current assets
Forward sales commitments1,547  1,547  
IRLCs550   550 
Total other current assets2,097  1,547 550 
Long-term investments
U.S. treasury securities56,194 56,194   
Total assets$576,093 $550,303 $25,240 $550 
Liabilities
Accrued liabilities
Forward sales commitments$ $ $ $ 
IRLCs307   307 
Total liabilities$307 $ $ $307 

Balance at December 31, 2021Quoted 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$509,971 $509,971 $ $ 
Total cash equivalents509,971 509,971   
Short-term investments
   U.S. treasury securities16,718 16,718   
Agency bonds11,906 11,906   
Equity securities5,113 5,113   
Loans held for sale35,759  35,759  
Other current assets
Forward sales commitments138  138  
IRLCs1,191   1,191 
Total other current assets1,329  138 1,191 
Long-term investments
U.S. treasury securities54,828 54,828   
Total assets$635,624 $598,536 $35,897 $1,191 
Liabilities
Accrued liabilities
Forward sales commitments$93 $ $93 $ 
IRLCs60   60 
Total liabilities$153 $ $93 $60 

There were no transfers into or out of Level 3 financial instruments during the periods presented.
11


The significant unobservable input used in the fair value measurement of IRLCs is the pull-through rate. Significant changes in the input could result in a significant change in fair value measurement. The pull-through rate used to determine the fair value of IRLCs was as follows:

Key InputsValuation TechniqueMarch 31, 2022December 31, 2021
Weighted-average pull-through rate
Market pricing
68.1%71.1%

The following is a summary of changes in the fair value of IRLCs for the three months ended March 31, 2022:

Three Months Ended March 31,
20222021
Balance, net—beginning of period$1,155 $1,771 
Issuances of IRLCs2,289 5,504 
Settlements of IRLCs(2,893)(5,139)
Net loss recognized in earnings(308)(199)
Balance, net—end of period$243 $1,937 

The following table presents the carrying amounts and estimated fair values of our convertible senior notes that are not recorded at fair value on our consolidated balance sheets:

March 31, 2022December 31, 2021
IssuanceNet Carrying AmountEstimated Fair ValueNet Carrying AmountEstimated Fair Value
2023 notes$23,318 $27,559 $23,280 $34,487 
2025 notes651,474 493,907 650,783 593,366 
2027 notes563,793 389,304 563,234 467,814 

The difference between the principal amounts of our 2023 notes, our 2025 notes, and our 2027 notes, which were $23,512, $661,250, and $575,000, respectively, and the net carrying amounts of the notes represents the unamortized debt issuance costs. The estimated fair value of each tranche of convertible senior notes is based on the closing trading price of the notes on the last day of trading for the period, and is classified as Level 2 within the fair value hierarchy due to the limited trading activity of the notes. As of March 31, 2022, the difference between the net carrying amount of the notes and their estimated fair values represented the notes' equity conversion premium. Based on the closing price of our common stock of $18.04 on March 31, 2022, the if-converted values of all three convertible notes were less than the principal amounts, respectively. See Note 15 for additional details on our convertible senior notes.

See Note 11 for the carrying amount of our convertible preferred stock.

Assets and liabilities recognized or disclosed at fair value on a nonrecurring basis include items such as property and equipment, goodwill and other intangible assets, and other assets. These assets are remeasured at fair value if determined to be impaired.

12

The cost or amortized cost, gross unrealized gains and losses, and estimated fair market value of our cash, money market funds, restricted cash, available-for-sale investments, and equity securities were as follows:

March 31, 2022
Cost or Amortized CostUnrealized GainsUnrealized LossesEstimated Fair ValueCash, Cash Equivalents, Restricted CashShort-term InvestmentsLong-term Investments
Cash$214,029 $— $— $214,029 $214,029 $— $— 
Money markets funds398,651 — — 398,651 398,651 — — 
Restricted cash36,047 — — 36,047 36,047 — — 
U.S. treasury securities145,510 40 (