The Real Deal New York

Redfin’s revenue hits $109.5M but
home sales are flat

Tech brokerage sold 13.6M homes in Q3
By E.B. Solomont | November 10, 2017 10:20AM

Glenn Kelman of Redfin

Redfin generated $109.5 million in third-quarter revenue — up 35 percent from the prior year — even as tight inventory took a bite out of potential home sales.

The Seattle-based firm said Thursday that net income for the quarter was $10.6 million, an 85 percent jump from the prior year’s $5.7 million profit. But CEO Glenn Kelman told investors that the profits were seasonal, and Redfin still does “not expect money on the full year.”

Overall, he said Redfin gained market share during the third quarter, several months after raising $159 million in a highly-watched IPO. To that end, Redfin’s marketing expenses were relatively flat — $5.4 million compared to $5.6 million in 2016’s third quarter. “Our agents have as much demand as they can handle, so there hasn’t been as much pressure on ad driven contact growth,” Kelman said.

Redfin agents recorded 13.6 million transactions during the third quarter valued at $6.3 billion, according to company filings. Although transaction volume rose from 10.6 million last year, it’s been relatively flat this year as a result of an inventory crunch. “There’s so much political gridlock in a place like San Francisco around building new homes, especially high density homes,” Kelman said.

Redfin, which charges buyers a lower commission rate, said it saved customers $37 million in fees during the third quarter. Traffic to its website — growing exponentially even before the company’s IPO — grew 38 percent to an average of 24 million monthly visitors during the quarter. That compares to 13.1 million in 2015’s third quarter. Redfin, which Kelman described as the “Amazon of real estate,” recently launched a mortgage origination business.

The industry has been watching Redfin’s performance closely, treating the company as a barometer for the potential for technology to disrupt real estate. Its IPO in July was seen as a boon to other real estate tech companies, including Compass, which raised $100 million in a Series E round this week. The funding round valued the firm at $1.8 billion.

But Wall Street is still getting a feel for Redfin, whose stock dipped 6 percent after its earnings report Thursday after missing its revenue target of $110.6 million. In its July IPO, Redfin’s stock price soared 45 percent to $21.72, valuing the company at $1.73 billion. But since hitting a $2.05 billion valuation this fall, Redfin’s market cap fell to $1.88 billion. On Thursday, the stock closed at $21.70 per share.

Part of investors’ questions have to do with profitability. The Seattle-based brokerage generated $267.2 million in 2016 revenue, but losses totaled $22.5 million.