One day after deciding to settle commission lawsuits with a proposed $9.25 million-dollar payout, Redfin, in a May 7 Q1 earning report, showed solid first quarter revenue of $225.5 million, an increase of 5% compared to the first quarter of 2023. Gross profit was $70.8 million, an increase of 22% year-over-year. Real estate services gross profit was $20.3 million, an increase of 28% year-over-year, and real estate services gross margin was 15%, compared to 12% in the first quarter of 2023.
“Market conditions recently got worse, but Redfin got better in the first quarter of 2024,” explained Redfin CEO Glenn Kelman. “Each of our business segments performed at the top of the range we set last quarter, or above that range. Our plan to build a larger marketplace, based on rental and for-sale listings, is paying off. Despite spending less than our major rivals on advertising, we continue to compete well for traffic. And our brokerage initiatives are working. Market-share, loyalty sales and luxury sales increased, with the strongest increases in the four California markets that eliminated agent salaries in lieu of higher bonuses. Revenue improved year-over-year, gross profit improved even more, and adjusted EBITDA improved the most, which tells us that we can spend less and still make more.”
The Seattle-based company’s numbers weren’t all positive. Net loss was $66.8 million, compared to a net loss of $60.8 million in the first quarter of 2023. Net loss attributable to common stock was $67 million. Net loss per share attributable to common stock, diluted, was $0.57, compared to net loss per share, diluted, of $0.55 in the first quarter of 2023.
Kelman briefly addressed Redfin’s lawsuit settlement, saying “We think it was worthwhile. It’s small relative to what other brokerages paid.”
He noted that buyer agents might receive commissions a little differently going forward than in the past.
“The buyer’s agent is going to be paid from the proceeds of the sale, in most cases,” he said. “We can say that the buyer is paying that since he’s the only one bringing a checkbook to the closing table, or we can say the seller is paying that because it’s money that otherwise would have been wired into his account. From the agent’s perspective what’s important is that the buyer doesn’t have to pay for this out of pocket in advance of a transaction. Essentially that it can be financed.”
The CEO cautioned, however, that his opinion of how the real estate business proceeds now differs from most other brokerage leaders.
I’ve heard other executives on earnings calls say that they don’t expect much change at all,” he said. “I think that is the consensus of most high-level executives of real estate portals. But if you talk to the agents on the ground, they are much more concerned about the possibility of significant change. I’m not trying to say that all heck is going to break loose, that the Four Horsemen of the Apocalypse are coming, but I do think there could be a medium level of change.
“As someone who has been trying to give consumers a better deal only to discover that buyers have been indifferent to price over the past 15 years because they’ve been trained to believe that a buyer’s agent is free, we have to welcome the possibility that consumers will become more aware of the fees, and will shop based on value and price. That is what Redfin has been hoping for all along, that when you give people a better deal they beat a path to your door.
“If you’d asked me 10 years ago if I could change one thing about the American consumer, I’d have said make sure they know how much a buyer’s agent really costs, and make them care about it. Am I worried about uncertainty? Of course! You want a CEO to be worried. But we have better cars than anyone else though.”
Q1 2024 Highlights
- First quarter market share was 0.77% of U.S. existing home sales by units, compared to 0.72% in the fourth quarter of 2023
- Adjusted EBITDA loss was $27.6 million, compared to adjusted EBITDA loss of $63.6 million in the first quarter of 2023
- Redfin’s mobile apps and website reached nearly 49 million average monthly users, compared to 50 million in the first quarter of 2023
- Achieved the best quarter on record for mortgage cross-selling, with a 28% attach rate in the first quarter of 2024, up 3 points from the first quarter in 2023. March was also the best month on record, with an attach rate of 30%
- Maintained momentum in loyalty sales, with 34% of sales coming from loyalty customers in the first quarter of 2024 compared to 33% in the first quarter of 2023
- Brought Title Forward to Chicago, Flagstaff and Phoenix, expanding Title Forward’s coverage of Redfin’s buy side sales from 54% to 66%
- On May 5, extended Redfin Next agent pay plan to Chicago, Connecticut, Dallas, Miami, New York, Palm Beach and Washington, D.C. To date, Redfin has signed more than 130 top-producing agents to join the brokerage under the Redfin Next program
- Continued efforts to prepare the business for changes as a result of the NAR settlement, including deploying buyer agreements nationwide through Sign & Save and emphasizing agent-led first tours through All You Can Meet
- Launched Ask Redfin, an AI-powered virtual assistant to help buyers quickly find information about for-sale homes. In beta, Ask Redfin drove significant increases in user engagement
