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Redfin rode the momentum it gained in the fourth quarter to a solid Q1 2024 performance, according to the company’s earnings release on Tuesday.
The Seattle-based company’s earnings grew 5 percent year over year to $225.5 million in Q1, beating analyst expectations by $7.4 million. Gross margins also improved, rising 22 percent annually to $70.8 million as gross profits from real estate services increased 28 percent year over year to $20.3 million.
Gross margins from real estate services also experienced a bump — rising 12 percent from Q1 2023.
While revenues and gross profits improved, Redfin’s net losses widened to $66.8 million — a 9.86 percent increase from the same time last year and a 65 percent increase from the last quarter. The net loss attributable to common stock was $67 million.
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) loss improved, dropping from $63.6 million in Q1 2023 to $27.6 million in Q1 2024.
Glenn Kelman
“Market conditions recently got worse, but Redfin got better in the first quarter of 2024,” Redfin CEO Glenn Kelman said in a written statement 30 minutes before the company’s Tuesday afternoon earnings call. “Each of our business segments performed at the top of the range we set last quarter, or above that range.”
Kelman said the company’s recent moves — including the launch of AI-powered home search assistant Ask Redfin and the emphasis on agent-led first tours through All You Can Meet — have led to solid gains in market share (0.72 percent to 0.77 percent) and average monthly users for mobile and website traffic (+2.04 percent to 50 million).
“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,” he said. “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,” he added. “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.”
Redfin’s earnings caps off a quarter which saw the company fighting a war on two fronts.
On the brokerage side, Redfin has found itself involved in two buyer-broker commission lawsuits, Gibson and a lawsuit seeking class-action status filed in the Central District of California in February. Redfin settled Gibson for $9.25 million on Monday, a decision a company spokesperson said enables Redfin to “remove uncertainty” as it continues to navigate several market shifts.
“We always have been, and always will be, advocates for transparency and saving consumers money, directly selling homes to buyers to bring down fees and broadly publishing commission data so consumers understand how much they are paying,” the spokesperson said on Monday. “Resolving this litigation now and removing uncertainty is in the best interest of the company, our employees and our investors.”
Beyond commission lawsuit woes, Redfin’s brokerage operations have undergone several changes, including the launch of the “Sign and Save” program that gives buyers a maximum refund of 0.5 percent for signing an agency agreement, and the expansion of its commission-based payment model, Redfin Next. Both programs have been pitched as crucial parts of Redfin’s strategy in a post-settlement world.
“We believe Redfin Next will be transformational for our brokerage, helping us retain our best agents, recruit top talent, and grow market share faster through both the ups and downs in the market,” Redfin Senior Vice President of Real Estate Sales Jason Aleem told Inman in March.
On the portal side, Redfin has flown under the radar as CoStar Group, Zillow and Realtor.com up the ante on the latest iteration of the battle for agent and consumer loyalty.
CoStar’s Homes.com has maintained — with much criticism — that it’s the second-most trafficked portal in the U.S. based on internal Google Analytics data. If accurate, that would bump Realtor.com to No.3 and Redfin to No.4 based on Inman’s October deep-dive into portal traffic trends.
While its competitors have spent time directly or indirectly biting back at each others’ claims, Redfin leadership has been relatively quiet save for a few comments made during quarterly earnings calls. Instead, they’ve focused on Ask Redfin, an artificial intelligence-powered home search assistant integrated into Redfin’s Apple iOS mobile app.
Available nationwide on May 3, Ask Redfin answers questions about listings and a host of other homebuying topics. If the question requires a more nuanced answer than Ask Redfin can provide, it can immediately connect buyers with a licensed real estate agent — an option 10 percent of users took advantage of during beta testing.
Kelman said the upcoming months will be focused on bringing Ask Redfin to Android devices and continuing to build a well-rounded post-settlement strategy, which includes creating buyer-broker agreements that align with the National Association of Realtors’ settlement guidance.
The agreement will be added to the online forms buyers see when requesting a first tour this summer. Kelman said the company anticipates testing two versions, one that says the tour is free and one that explains the future fees associated with purchasing a home.
“We’ll leave it to our agents to present a full buyer’s agency agreement after that tour,” he said during the earnings call. “We’ll have the whole summer learn how best to explain our fees without confusing prospective customers.”
Kelman said the company will also focus on continuing to improve mortgage attachment rates, strengthening Redfin’s hold in the rental marketplace, and giving consumers more choice in how they decide to buy and sell homes as the industry inches closer to the enforcement of NAR’s settlement terms.
“Our initiatives to meet our customers face to face have made it easier to guide them through this volatile market. We’re earning more money from digital channels and we’re spending less,” he said. “Our bet isn’t that the market will get better. The reason Redfin will win this year is because we’ve gotten better.”
Redfin’s performance, which included stiff cost-cutting measures that led to narrowing revenue and net losses in Q4, has led to stock gains. The company’s stock (NASDAQ: RDFN) has grown 8.77 percent over the past six months to $6.45 per share.
Redfin’s stock did experience a minimal hit (-0.54 percent) after its commission settlement; however, that dip may be short-lived considering analysts’ cautiously growing confidence in the company.
Email Marian McPherson
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