- Revenue: $295 million, up 7% year over year.
- Gross Profit: $110 million, up 9% year over year.
- Gross Margin: Expanded from 36% to 37%.
- Total Operating Expenses: $139 million, down $10 million year over year.
- Adjusted EBITDA: Flat, up from a loss of $7 million in the prior year.
- Net Loss: $28 million, compared to a net loss of $27 million in the prior year.
- Diluted Loss Per Share: $0.23, compared with $0.25 one year ago.
- Real Estate Services Revenue: $188 million, up 4% year over year.
- Rentals Revenue: $51 million, growth of 12% year over year.
- Mortgage Revenue: $40 million, up 5% year over year.
- Other Segment Revenue: $17 million, compared to $11 million in the prior year.
- Real Estate Services Gross Margin: 28.6%, down 250 basis points year over year.
- Rentals Gross Margin: 77.2%, compared to 77.0% a year ago.
- Mortgage Gross Margin: 19.0%, up from 10.8% a year ago.
- Other Segment Gross Margin: 54.0%, up from 44.1% a year ago.
- Adjusted EBITDA Loss (Real Estate Services): $4 million, down from positive $9 million in the prior year.
- Adjusted EBITDA (Rentals): $1 million, marking the fourth straight quarter of positive adjusted EBITDA.
- Adjusted EBITDA (Mortgage): Positive $1 million, up from a loss of $2 million in the prior year.
- Adjusted EBITDA (Other Segment): $8 million, compared to $4 million in the prior year.
- Third Quarter Revenue Guidance: Expected to be between $273 million and $285 million.
- Third Quarter Net Loss Guidance: Expected to be between $30 million and $22 million.
- Third Quarter Adjusted EBITDA Guidance: Expected to be between $4 million and $12 million.
Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Redfin Corp (RDFN, Financial) achieved breakeven adjusted EBITDA for the second quarter, which was at the top of their guidance range.
- Real estate services revenue reached $188 million, meeting the upper end of their guidance.
- The company saw a year-over-year increase in the share of home sales brokered by their agents, marking the first gain in nearly two years.
- Redfin Corp (RDFN) successfully integrated their rentals business, reducing operating expenses by 19% year over year.
- Title Forward, their title business, achieved extraordinary performance with attach rates above 60% and year-over-year revenue growth above 50%.
Negative Points
- Total net loss for the second quarter was $28 million, slightly higher than the $27 million loss from the prior year.
- Real estate services gross margin decreased by 250 basis points year over year, primarily due to increased personnel costs and transaction bonuses.
- The company anticipates lower real estate services margins in the second and third quarters due to one-time transition pay for agents.
- Despite a drop in mortgage interest rates, there was minimal immediate reaction from homebuyers, indicating potential market challenges.
- The company expects total net loss for the third quarter to be between $30 million and $22 million, compared to a net loss of $19 million in the third quarter of 2023.
Q & A Highlights
Q: How should we think about real estate gross margins once the majority of agents are under Redfin Next? And how should we think about long-term company EBITDA margins under the Redfin Next model?
A: (Glenn Kelman, CEO) We expect long-term gross margins on sales sourced from redfin.com to be similar or better under Redfin Next. There may be incremental sales from more entrepreneurial agents, but our focus remains on gross profit from redfin.com. We anticipate some pressure from lower fees due to the NAR settlement, but we can offset this by becoming more efficient. Overall, we expect margins to improve as the business becomes more digital and efficient.
Q: Can you elaborate on the types of agents that the Redfin Next approach is resonating most with?
A: (Glenn Kelman, CEO) The appeal of Redfin Next is broad, but agents with experience working with online opportunities, such as those from Redfin's partner program or other websites, are particularly effective. These agents have a systematic approach to maximize gross profit from online leads. We are also focusing on forming teams around top producers to scale hiring and improve service levels.
Q: What is your base case expectation regarding NAR buy-side fees, and how do you plan to trade off lower fees per sale for driving more volume?
A: (Glenn Kelman, CEO) We expect some compression on fees due to the NAR settlement. Early indications show a trend towards lower commission rates. We plan to use price as a weapon to gain share by offering better deals to customers, which should drive higher close rates and more demand from our website. Over time, we aim to equilibrate margins between our listing and buyer services.
Q: How do you plan to achieve significant profitability in the years ahead?
A: (Glenn Kelman, CEO) We plan to achieve significant profitability by scaling real estate services at similar margins, generating more gross profit from online demand, and growing our digital businesses. We expect the housing market to improve, but our overarching thesis is that the business will become more digital, leading to higher margins and profitability.
Q: What is your plan if mortgage rates do not come down?
A: (Glenn Kelman, CEO) Our plan is to remain resilient and continue focusing on self-help measures. We have built a model that does not rely on low rates, and we are prepared to take share regardless of market conditions. We will continue to be efficient and focus on profitability.
Q: How do you expect the market to fare in Q3, and how does this influence your guidance?
A: (Christopher Nielsen, CFO) Our guidance is based on current customer behavior and booked revenue. The market has been slow in recent months, and we are not making significant assumptions about an improving housing market. We are cautious but prepared to respond if conditions improve.
Q: How do you view the partnership business with the introduction of Redfin Next?
A: (Glenn Kelman, CEO) We expect the partner business to continue growing due to improved sales execution and a focus on the most profitable opportunities. We are raising service levels and finding that extra agents are paying for themselves through higher close rates. The business will continue to shift towards a more digital margin.
Q: What is your strategy for managing costs and driving profits?
A: (Christopher Nielsen, CFO) We are focused on being tight on costs and managing the business efficiently. We believe we have the right cost structure in place to grow the business and drive profits through a combination of revenue growth and cost containment.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
