Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Redfin Corp (RDFN, Financial) reported a 3% year-over-year increase in third-quarter revenues, reaching $278 million.
- The company achieved its third consecutive quarter of organic revenue growth.
- Redfin Corp (RDFN) is seeing improvements in its mortgage segment, with revenue up 8% year-over-year and gross margin increasing from 10% to 15.2%.
- The rentals segment posted its eighth straight quarter of growth, with revenue increasing by 9%.
- Redfin Corp (RDFN) plans to significantly increase advertising spending from 2024 to 2025, aiming to capitalize on a potentially improving housing market.
Negative Points
- Redfin Corp (RDFN) experienced a larger-than-expected full-year loss, with fourth-quarter guidance indicating an adjusted loss between $15 million and $22 million.
- The company's adjusted EBITDA profits of $4 million were at the bottom of their guidance range, partly due to $4 million in unexpected one-time expenses.
- The share of home sales brokered by Redfin Corp (RDFN) agents fell by two basis points year-over-year in the third quarter.
- Redfin Corp (RDFN) reported a net loss of $34 million for the third quarter, compared to a net loss of $19 million in the prior year.
- The company's real estate services revenue decreased by 1% year-over-year, with a decline in brokerage revenue per transaction.
Q & A Highlights
Q: Can you discuss the factors affecting the third quarter results and the outlook for profitability in the coming year?
A: Christopher Nielsen, CFO: The primary difference in our expectations for the second half of the year was due to lower volumes in the third quarter, leading to less revenue and additional unanticipated costs, particularly related to the Redfin Next program. These extra costs have been addressed and won't continue into the fourth quarter or next year. We are not issuing 2025 guidance yet, but we plan to invest in growth, particularly in media, while continuing to find efficiencies in the business to support profitability.
Q: What are the early indications from the expansion of Redfin Next into all markets, and how does it impact your expectations for market share gains?
A: Glenn Kelman, CEO: We are optimistic about Redfin Next due to higher close rates, especially for luxury customers, and increased agent census. In markets where we had share problems, we were understaffed, but we are now recruiting successfully. The new agents are experienced, which should help us gain market share.
Q: How do you view the recent increase in home buying activity, and what are your thoughts on 2025 housing volumes?
A: Glenn Kelman, CEO: The recent increase in activity has been surprising, given the usual inverse relationship between mortgage rates and sales. However, if rates continue to climb, it will eventually impact sales. Despite geopolitical uncertainties, I expect 2025 to be better than 2024, especially after the September low.
Q: What drove the slight market share decline in the third quarter, and how do you plan to address it?
A: Glenn Kelman, CEO: The decline was partly due to less traffic growth and aggressive advertising by competitors like homes.com. We plan to increase our advertising budget in 2025 and focus on demand generation, as we believe we can close sales better than before.
Q: How does the Redfin Next program affect agent compensation and gross margins?
A: Glenn Kelman, CEO: Agents earn twice as much if they source the sale themselves, but most sales are sourced by our website, maintaining or improving margins. The program shifts compensation from fixed salaries to transaction bonuses, which should be neutral on gross margins overall.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
