With Redfin CEO Glenn Kelman acknowledging headwinds in the market, he described his company’s strategy as running a marathon against competitors Zillow, Realtor.com and, soon, CoStar.
“As you mature as a runner you realize that everyone suffers,” Kelman told investors during an earnings call on Thursday when Redfin reported earning $597.3 million in revenue and a net loss of $90.8 million during the first three months of this year.
“The point of max suffering is when those best prepared for it will win,” he said. “Redfin has arrived at this point in our race.”
Despite the loss, the online brokerage portal beat investors’ most optimistic expectations for revenue.
Heading into 2022, when many analysts expected home sales to compete with the records set in 2021, Kelman was perhaps one of the least optimistic. But he said the company’s recent major acquisitions — including a rush of hiring new agents, buying Bay Equity to bolster its mortgage division and adding rentals to its site — set itself up to emerge ahead of competing portals.
“Our mortgage business will go from a major source of Redfin’s 2021 losses to a major source of 2022’s profit,” he said.
Redfin began training a string of new agents that have been hired to compete for the rush of buyers moving from high-cost markets to lower-cost areas in the Sun Belt.
“We think that we will gain share as these agents season,” Kelman said. “That’s especially true in the places where we’ve hired the most agents like in the southeast.”
With the addition of rental listings to the platform, Kelman said the company was building relationships with people who aren’t yet in the market to buy, while at the same time satisfying the fundamental need for housing.
“We can’t have people build relationships with other websites for the first 30 years of their life,” and then try to attract them when it’s time to buy, Kelman said.
Thursday’s report provided a glimpse of how companies have performed amid the start of a rapid rise in mortgage rates, which soared past 5.5 percent this week and have climbed much faster than analysts expected coming into this year.
A closer look at the numbers
The company offered an upbeat outlook, saying its market share grew to 1.18 percent of U.S. existing home sales by value in the quarter. Users on the portal’s app and website also climbed 11 percent, to 51 million monthly users.
The company said in the earnings report, released after the close of markets on Thursday, that its gross profits were $72.5 million, though it posted a $90.8 million net loss after accounting for its common stock expenses. The company’s real estate services accounted for $23.7 million of its gross profit, a 41 percent drop year-over-year.
“We are still very cautious about the housing market overall,” Kelman said. “We think that we will take significant share as we progress through 2022.”
The company has been reporting soaring revenue over the past year, climbing from $268 million during the first three months of 2021.
At the same time, it has continued to post net losses. Analysts had expected Redfin to earn $551.1 million in the quarter. Its actual reported earnings marked a 123 percent increase over the same time period last year.
During the final three of 2021, the company pulled in $643.1 million, a spike of 163 percent compared to the same time a year earlier. Despite that soaring revenue, the company posted a net loss of $27 million to close out last year.
But Kelman reiterated the company’s strategy and fell back on his marathon analogy: “Most marathoners are trying to complete the race,” he said, “not compete in it.”
The company reported earning $376 million through the sale of 617 properties from its iBuying arm, the most ever in the company’s history of buying and reselling homes through the program.
That’s a big jump from the same quarter last year, when the company sold 171 properties for a total of $90 million in revenue.
Kelman suggested that rather than speculating on price appreciation to drive profits for its iBuying arm, RedfinNow, the company would own “properties only as necessary to facilitate a sale.”