And the results were not great in terms of bottom-line. The company recorded a net loss of $90.8 million for the first quarter ended March 31, compared to a net loss of $35.8 million in the first quarter of 2021.
Still, Redfin CEO Glenn Kelman is confident that his company ultimately has what it takes to win the race. If you dig below the red ink, there are some promising signs.
“When talking about a business’s ups and downs, it’s common to say the endeavor is a marathon, not a sprint,” Kelman said during Redfin’s first quarter earnings call with investors on Thursday. “But most marathoners are trying to complete the race, not compete in it.
“At your first marathons, you dread the point at which the suffering will become intense, but as you mature as a runner, you realize that everyone suffers, and the point of maximum suffering is when those best prepared for it will win,” Kelman added. “What you once thought of as suffering time becomes winning time, but only if you seize the moment.”
In Kelman’s view, that moment has arrived and, he said, “now is Redfin’s winning time.” In terms of revenue, Kelman’s confidence seems warranted.
During Q1 2022, Redfin recorded $597.3 million in revenue, up 123% from the first quarter of 2021 and roughly $20 million better than executives expected. The firm’s brokerage arm was responsible for $167.872 million of that revenue, with the rentals arm and mortgage arm contributing $38.044 million and $2.917 million, respectively.
Redfin’s properties division, which includes its iBuying operation, Redfin Now, realized $379.753 million in revenue, compared to $92.726 million during the first quarter of 2021.
Despite this booming increase in revenue, Redfin could not outrun the red ink in this leg of the marathon.
A hot topic on the earnings call was, of course, the changing and somewhat uncertain housing market conditions.
“Our breadth, strategy and competitive position have gotten better over the past year, but the housing market has gotten worse,” Kelman said on the call.
According to Kelman, as homebuyer interest has turned from the traditional coastal metropolitan areas to more rural areas, as well as the Sun Belt, the company has focused on recruiting more agents in other parts of the country.
“We traditionally had more presence in the South and the Sun Belt, so we think that we will gain share in these areas, and that is especially true in the place where we’ve hired the most agents, like the Southeast,” Kelman said.
Redfin’s market share increased 2 basis points from a year ago, to 1.18% of all U.S. existing home sales by value during the first quarter of this year. The company’s leadership attributed this increase to expanding traffic on Redfin’s mobile apps and website.
Compared to the first quarter of 2021, the number of average monthly users in the firm’s mobile apps and website was up 11%, to 51 million. Executives hope to continue this trend by bringing more housing inventory to the site, both through the expansion of rental searches and by hooking up the website to a national listing feed “that by year end will let [Redfin] show every home for sale in America, when today coverage is limited to 91% of homes.”
While executives found this to be encouraging, hesitancy over housing-market conditions prompted them to curtail the volume of homes handled by Redfin Now. But Kelman remains confident that iBuying can and will be a successful and profitable component of the Redfin ecosystem.
“Even as the housing market turned, Redfin Now generated almost as much gross profit in the first quarter as our brokerage did during the first quarter of 2021,” he said. “This validates our thesis that iBuying will be most successful within a brokerage.
“First, because we’re already equipped to sell the homes we buy, but second because we can promote our agents to customers who ask about a cash offer but end up hiring an agent. Our goal isn’t to own more homes than other iBuyers; we want to sell more homes, owning properties only as necessary to facilitate a sale.”
Although Kelman said Redfin remains cautious about the housing market, he did share his enthusiasm about the company’s future with investors.
“[Redfin is] more optimistic than ever about our strategy, which is to drive customer demand by building Redfin.com into a complete destination for real estate information and to make more money for each customer by becoming a one-stop shop for buying or selling a home.”
In addition, Kelman said that Redfin has an “ironclad commitment to major net income improvements, not in the distant future, but now.”