Redfin Beats Revenue Consensus in Q1 Despite Continued Losses

The U.S. brokerage and discovery site operator Redfin posted Net loss of $61 million in Q1 but managed to beat analyst estimates in terms of revenue. Highlights of the company's performance during a depressed quarter for the North American housing market include:

• Revenue of $325 million was down 45% on the comparison period of 2022 but beat company and analyst expectations.
• Net loss stood at $60.8 million compared to a loss of $90.8 million for Q1 of 2022.
• Web traffic remained stable at 50 million average monthly unique users.
• The market share of transactions was flat at 0.78% of existing home sales.

Seattle-based Redfin operates a brokerage business but thanks to the unique market dynamics of the North American housing market is able to list properties that its brokerage division doesn't represent and over the years has become one of the United States' most popular portal sites in its own right.

Commenting on his company's performance during a period affected by inflation and soaring mortgage rates, CEO Glenn Kelman said.

“Redfin’s first-quarter revenues and earnings exceeded our expectations, keeping us on track for full-year adjusted EBITDA in 2023.We’re drawing online visitors away from our main rivals, and our brokerage has gotten more efficient. For the second quarter, we expect gross-margins gains in our core business for the first time since 2021."

The company's missive to the market emphasised the fact that Redfin has now sold off all but five of the homes it bought through its now-defunct iBuying business, RedfinNow. The sell-off has contributed to the company reducing net debt by more than $300 million.

Redfin has made two big acquisitions over the last few years. In March 2022 it paid $608 million to acquire the rental portal operator RentPath which was subsequently renamed to Rent.

The other big acquisition that Redfin is working hard to integrate is that of the traditional mortgage brokerage business Bay Equity Home Loans which it bought for $135 million in early 2022. The acquisition has brought about a surge in volume for Redfin's mortgage business and, according to Kelman, its Net income has improved as well.

Speaking of the performance of his company's two expensive gambles, Kelman said:

"The two companies we acquired over the past two years to earn additional revenue from the people using our site and our brokerage are also starting to deliver results: Rent’s revenue growth is accelerating, and Bay Equity’s net income improved, with more than one in five Redfin homebuyers getting a mortgage from Bay Equity in the first quarter."

Redfin's report also highlighted several product updates shipped during the quarter which included a cost of living calculator, instant tour scheduling for rental properties and a search and discovery plugin for the popular AI interface ChatGPT.

The company is expecting Q2 revenue of between $268 million and $281 million, representing a year-over-year decline between (24)% and (20)% compared to the second quarter of 2022 with a net loss between $35-44 million. Kelman said that he wouldn't wish a housing downturn on anyone but that it had made his company "leaner, hungrier and better."