What happened
Shares of Redfin (RDFN 6.85%) surged after the online real estate brokerage's first-quarter results showed it is recovering from the housing slowdown.
The stock closed up 33.2% on the news.
So what
Revenue plunged 45% to $325.7 million, reflecting the company's exit from the Redfin Now home-flipping business, but that beat the analyst consensus estimate of $314.5 million. Service revenue, which mainly reflects its brokerage business, was down 2.1% to $212.9 million, but gross profit improved, showing it's becoming more efficient.
Market share in Q1 fell slightly from 0.79% to 0.78%, a potential warning sign. However, the company touted increased momentum in mortgage cross-selling, with 20% of buyers now choosing Redfin for their mortgage, up from 16% in the quarter a year ago.
Redfin's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss widened from $48.8 million to $66.8 million. On the other hand, GAAP net loss per share benefited from a one-time gain and narrowed from $0.86 to $0.55, beating analysts' estimates for a $1.00-per-share loss.
CEO Glenn Kelman expressed optimism about the company's current direction, saying:
Redfin's first-quarter revenues and earnings exceeded our expectations, keeping us on track for full-year adjusted EBITDA in 2023. We're drawing online visitors away from our main rivals, and our brokerage has gotten more efficient. For the second quarter, we expect gross-margin gains in our core business for the first time since 2021.
Now what
For Q2, the company forecast revenue of $268 million-$281 million, reflecting a 20%-24% decline, which was below the consensus of $297 million. That guidance doesn't include any revenue from its properties segment, which is expected to be discontinued in the second quarter.
On the bottom line, it anticipates a net loss of $35 million-$44 million, which compares to a net loss of $78 million in the quarter a year ago.
Redfin still has a lot of work to do to get back to profitability, but with the stock falling nearly 90% last year, shares are arguably cheap if it can return to financial health, and investors are rewarding it for taking steps in that direction.
