Hours after announcing that Redfin would lay off hundreds of employees and abandon its iBuying business, CEO Glenn Kelman struck a combative tone.
“We need to take share,” he told analysts on the brokerage’s third-quarter earnings call Wednesday. “We need to kick butt.”
Redfin reported $90.2 million in losses for the quarter, more than the $78 million it lost in the quarter before, as rising mortgage rates continued to hammer the housing market.
Kelman praised the company’s website for ranking highly in Google search results and predicted that its rental line of business would reach profitability by the end of next year.
“The only growth we’ll get next year is what we take from others,” he said on the call, assuring listeners that “we’ll pay our debts come heck or high water.”
Redfin had $360 million in cash at the end of September, down from $590 million at the start of the year. The company expects to bank $100 million by the second quarter of next year selling off inventory from its now-defunct iBuying platform, RedfinNow, chief financial officer Chris Nielsen said.
“We have to assume that it will be night always, and to make money in that market,” Nielsen said, somewhat gloomily, “instead of saying the sun is going to come out tomorrow.”
Kelman predicted that Redfin would be profitable by the end of 2024, and quashed the idea of the firm becoming an online referral business instead of employing salaried real estate agents.
The company wrote down the value of its remaining home inventory by $18 million, a result of buying property at higher prices than the market can now bear.
Kelman and Nielsen predicted that Redfin will lose between $118 million and $134 million next quarter, compared to a net loss of $27 million in the fourth quarter of last year, with total revenue between $430 million and $459 million. That would represent a year-over-year decline of between 29 and 33 percent.
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Prior to the call, the brokerage announced the end of its iBuying operation and said it would terminate 13 percent of its employees, amounting to 862 people. The layoffs are the company’s second wave of cuts in five months.
“We’re closing our iBuying business, RedfinNow, because maintaining a profit with rising interest rates would make our offers on homes insultingly low,” a spokesperson for the company said. “To prosper in a housing downturn that could last at least through 2023, we have to simplify our business.”
About one-third of the layoffs are related to the demise of RedfinNow.
“We plan to keep increasing our share of the market, but that market in 2023 is likely to be 30 percent smaller than it was in 2021,” Kelman wrote in a post announcing the cuts. “The June layoff was a response to our expectation that we’d sell fewer houses in 2022; this layoff assumes the downturn will last at least through 2023.”