Tech-focused brokerage and online portal Redfin announced Thursday that its revenue jumped 128 percent between July and September, compared to a year earlier, and also that its losses dropped while iBuyer revenue grew.
In total, Redfin hauled in $540 million during the third quarter of this year. The company also suffered a net loss of $18.9 million. That loss is down from one year prior, when Redfin lost $34.2 million, as well as from the previous quarter, when net losses totaled $27.9 million.
In Thursday’s report, Redfin CEO Glenn Kelman said the company “had a fantastic quarter.”
“Our revenues were at the top of the range we gave investors in our last earnings report, and our net income exceeded that range,” Kelman continued. “Our year-over-year market-share gains continued even as the housing market slowed, and our website again improved its standing against its largest competitors.”
Thursday’s report comes while much of the real estate industry is still debating the news that rival Zillow plans to shutter its iBuying program. Zillow revealed those plans in its own earnings report, and the announcement has subsequently prompted a widespread debate about the viability of iBuying in general — a business that Redfin is also in, albeit to a much smaller degree.
In Redfin’s report Thursday, Kelman singled out his company’s iBuying program, dubbed Redfin Now, saying that it “grew revenues by more than 1,000 percent all while selling homes above our forecasted price.”
During an call with investors Thursday afternoon, Kelman went on to say that in the spring the company began basing Redfin Now offers on the idea that the market, which had been dominated by rapid appreciation, could change course.
“When other iBuyers were paying more we were paying less,” Kelman explained.
He later added that “these were good decisions.”
“Redfin Now could have grown to almost any size if we hadn’t been disciplined in what we pay for homes,” Kelman also said.
Kelman didn’t explicitly mention Zillow during the call, though he did acknowledge that iBuying has received a significant amount of attention this week. And in that context, he said that Redfin’s “priority is as always to build a sustainable business.”
In response to questions from investors, Kelman said on the call Thursday that some iBuyers may have been inspecting homes via a video call. Redfin, on the other hand, sends licensed inspectors to all the homes it buys. That may make Redfin slower than other iBuyers, but the company tries to err “on the side of caution, because you have to in a balance sheet business,” Kelman said.
“We’ve just tried to figure out the right balance between scale and caution,” he added.
He went on to say that iBuying is simply one of many offerings Redfin brings to the table with consumers. Having a diversified business gives Redfin flexibility to lean into or away from iBuying depending on market conditions, and “that flexibility is more important than scale,” Kelman said.
“Redfin isn’t an iBuying company at all,” Kelman added. “It’s part of what we do but it’s not who we are.”
All of that said, Kelman did ultimately conclude that “iBuying isn’t going away.”
“I just was on the Inman stage […] saying it’s going to be between 1 and 10 percent of the market,” Kelman concluded, “but I’ve never said it’s going to be zero either.”
Going into Thursday’s report, analysts had expected Redfin to reveal $538.31 million in revenue, which would have been up 127.2 percent year over year. Redfin’s actual earnings mean the company slightly beat expectations.
Redfin’s share price jumped more than $3 during regular trading Thursday leading up to the company’s earnings report, eventually hovering around $51 per share. That’s down slightly for the week, and from February when shares were fetching nearly $100.
Redfin’s stock fluctuated during after hours trading Thursday in the moments after the company published its earnings, briefly jumping by several dollars before falling to below $50.
As of the end of trading Thursday, Redfin had a market cap of about $5.4 billion.
Thursday’s report comes after several quarters of significant revenue growth for Redfin. In August, the company announced that it raked in $471 million during the second quarter of this year, up 121 percent compared to one year earlier. In May, the company revealed that revenue in the first quarter of this year grew 40 percent year-over-year to $268 million.
Beyond revenue growth, Redfin further revealed in its report that it now has 1.16 percent market share in the U.S.
The company’s website and app also had a total of 49.1 million average monthly visitors during the quarter, which was unchanged from a year earlier, according to the report.
During his call with investors, Kelman said that under normal circumstances Redfin would “be alarmed by the absence of growth” when it comes to traffic. However in this case, the flat traffic growth came as the market returned to something closer to normal seasonality, which 2020 didn’t really have.
Kelman ultimately concluded that he’s optimistic about the future.
“We can’t wait to see,” he said, “what happens in the last quarter of 2021 and in 2022.”
Update: This post was updated after publication with additional information from Redfin’s earnings report, and with commentary from Redfin’s call with investors.