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In its first earnings report since bowing out of iBuying, Redfin on Thursday revealed that amid a toughening real estate market its revenue fell and its losses grew in the final three months of 2022.
The numbers, from an earnings report published Thursday, show that the company brought in a total of $479.7 million in revenue during the fourth quarter last year. That’s a 25 percent drop compared to the fourth quarter of 2021.
At the same time, the company lost a total of $61.9 million, up from $27 million during the same period one year prior.
Glenn Kelman
In the report, CEO Glenn Kelman said that his company spent the fourth quarter shifting “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,” Kelman continued, alluding to a slagging housing market that many experts have said is likely to lead to a brutal earnings season this month.
During a call with investors Thursday afternoon, Kelman said that he expects Redfin to make a net profit in 2024, adding that the firm will be well-positioned to “make a lot of money” when the market ultimately improves.
Thursday’s report also includes figures for all of 2022. In total, the company brought in about $2.3 billion in revenue over the course of the year. That’s a jump of 19 percent compared to 2021. Nevertheless, total losses for the year ended up at $321.1 million, a spike from the net loss of $109.6 million the company experienced in 2021.
Heading into Thursday’s earnings report, Redfin shares were trading just above $9 — down for the day but a major improvement from the company’s low point in November of last year when shares fell to just above $3.
Shares fell in after-hours trading following Redfin’s publication of its earnings report.
Credit: Google
Redfin’s market cap was hovering just below $1 billion Thursday when markets closed.
While speaking with investors, Kelman described Redfin’s share price plunge to around $3 as a “near death experience” that prompted the company to “question everything.”
Redfin last reported earnings in November. At the time, the company revealed that it brought in $600.5 million in revenue between July and September of 2022. That represented an 11 percent year-over-year increase.
However, losses in the third quarter of 2022 also soared to $90.2 million — up from a loss of just $18.9 million in the third quarter of 2021.
Redfin’s November earnings report arrived just hours after it announced its exit from iBuying. Two months later, Kelman said he “probably should have closed the iBuying business earlier.”
Either way, the move highlighted Redfin’s scramble to achieve profitability and expand market share — something analysts recently told Inman it has struggled to do — amid a rapidly shifting housing landscape. Back in January, some industry veterans also expressed skepticism about Redfin’s salaried agent model and suggested the company’s modus operandi of trying to operate in so many different verticals makes success more difficult.
Since then, though, investors seem to have warmed to the company and its efforts to grow. Over the last month, Redfin shares are up nearly 60 percent.
The company has also continued to roll out new products, including a new program called Redfin Premier that debuted just this week. According to Redfin’s website, the program is “designed to deliver the best experience in luxury real estate.” The program is geared toward sellers, who ended up paired with an “elite” Redfin agent who can “price, prepare, and market luxury homes so they attract qualified buyers and sell for more.”
In his investor call Thursday, Kelman weighed in on a range of topics. Among other things, he touted the company’s employee-agent model and said Redfin is seeing more and more repeat and referral customers. He also said the percentage of people who go through with a transaction using Redfin after meeting with a company agent is rising.
“This tells us that even though the market is down our sales execution is up,” he explained.
Kelmen went on to say that 95 percent of consumers use portals, such as Redfin to search for listings, but only 5 percent of transactions actually originate on the portals. He argued that number could eventually rise to 50 percent — a development that would be a massive boon to Redfin.
Kelman also said during the call that he expects Redfin to have completely sold off its entire inventory of homes from its iBuying business by the second quarter of this year. Currently, Redfin has 19 homes that have either not been purchased or for which the company hasn’t accepted an offer.
In addition to numbers on revenue and profit, Thursday’s new earnings report additionally revealed that Redfin had a market share of 0.76 percent of existing U.S. home sales in the fourth quarter of 2022. For the entire year, the company’s market share was 0.8 percent.
Redfin’s websites and mobile apps saw 44 million average monthly users in the fourth quarter, the report notes. That was down slightly compared to the fourth quarter of 2021 when the company had 43 million average monthly users online.
Despite the dip, Kelman said during his call that broader online real estate searches declined more steeply — meaning the company beat the broader market in terms of traffic. He also touted the fact that Redfin’s sites are tending to show up first for people doing Google searches.
Average monthly users were slightly higher for the total year, at 50 million — which the report describes as a record for Redfin and a 5 percent jump compared to 2021.
Redfin’s brokerage handled far fewer transactions during the fourth quarter of 2022 than it did one year earlier, the report further shows. In total, the company completed 12,743 deals between October and December of last year, according to the report. By comparison, it did 19,428 during the final three months of 2021.
Such a dip, however, is not entirely surprising given the significantly slower market at the end of 2022 compared to what was happening in 2021.
Moreover, Redfin managed to generate $10,914 per transaction in the fourth quarter of 2022, versus $10,900 one year earlier.
Speaking of the market, Kelman explained during his call that Redfin believes 2023 will ultimately see about 4.3 million existing home sales this year — though he added that “rate volatility” and consumer “jitters” make predictions especially hard right now.
Kelman additionally expects inventory to remain low in 2023 and for affordability to remain an issue for buyers, especially millennials. Still, he ultimately struck an upbeat tone, saying the company can adapt to a shifting market and is meeting its goals to achieve profitability.
“We couldn’t be more excited,” Kelman said during the call, “about the year ahead.”
Update: This post was updated after publication with additional details from Redfin’s earnings report, and with commentary from executives’ call with investors.
