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Redfin's Growth Accelerates

By Joe Tenebruso – Aug 3, 2019 at 12:32PM

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The real estate company's revenue climbed 39% in the second quarter.

Redfin (RDFN) reported second-quarter results on Aug. 1. The residential real estate services company is expanding at a blistering pace, as it seeks to gain share in the massive U.S. housing market. 

Redfin results: The raw numbers

Metric

Q2 2019

Q2 2018

Year-Over-Year Change

Revenue

$197.8 million

$142.6 million

39%

Net loss

($12.6 million)

$3.2 million

N/A

Net loss per share

($0.14)

$0.04

N/A

Data source: Redfin Q2 2019 earnings release.

What happened with Redfin this quarter? 

Redfin is gaining share in the $80 billion U.S. real estate brokerage industry. The company accounted for 0.94% of U.S. existing home sales by value in the second quarter, up from 0.83% in the year-ago period.

Redfin's low-fee internet-based model is clearly resonating with home buyers and sellers. Visitors to the company's website and mobile app jumped 27% year over year.

To further fuel its growth, Redfin is expanding its brokerage services to new markets. The company says it now serves more than three-quarters of the U.S. population.

In turn, growth in Redfin's brokerage revenue accelerated to 17% in the second quarter, up from 15% in the first quarter 13% in the fourth quarter of 2018. 

A person pointing to an upwardly sloping line

Redfin's revenue growth is accelerating. Image source: Getty Images.

Better still, Redfin's other divisions are growing even faster. Its Redfin Now home buying and selling business saw revenue soar 344% to $39.9 million. Meanwhile, Redfin's other businesses, which include its mortgage and title services, grew revenue by 89%, up from 59% in the second quarter. 

Redfin is investing aggressively to expand these businesses, which is weighing on it profitability. Yet this is consistent with Redfin's philosophy of sacrificing short-term profits for long-term value creation. "We expect these businesses, which already contribute meaningfully to revenues today, to contribute meaningful gross profits three to five years from now," CEO Glenn Kelman said during a conference call with analysts.

All told, Redfin's companywide revenue leapt 39% to $197.8 million. The company did, however, generate a net loss of $12.6 million, or $0.14 per share.

Looking forward

Redfin expects third-quarter revenue to surge 59%-66% to between $223 million and $233 million. Management is also guiding for net income of $3.4 million to $6.4 million, up from $3.5 million in the prior-year period.

Looking further ahead, Kelman shared his long-term vision for his company. 

Our goal is to be the first national provider of a complete real estate solution, which was a major premise of our 2017 public offering. The financial rationale for this strategy is obvious. If we make more money per customer than any other real estate company, we can spend more than any other company on finding and serving that customer. But we also believe that listing search, brokerage service, mortgage, title, instant offers, and renovations are more than the sum of their parts and that we can, over time, combine these services in ways that let our customers buy and sell homes other people can't.

Kelman is building Redfin into a powerful force within the U.S. real estate industry. As the company gains scale, its integrated suite of services could give it competitive advantages that its rivals may find difficult to match.

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool recommends Redfin. The Motley Fool has a disclosure policy.

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