After taking a battering for most of 2022, topped off by the sudden closure of its iBuying business in November, Redfin is joining fellow portal giant Zillow in projecting optimism for 2023, despite significant drops in revenue and marketshare.
Reporting Q4 2022 revenue of $479.7 million, down 25% from last year, and a net loss of $61.9 million (compared to $27 million in Q4 2021), CEO Glenn Kelman says the first couple months of 2023 have him feeling good about a turnaround.
“We’re still on course to earn an adjusted EBITDA profit for the full year, and on schedule to sell our last RedfinNow home in the second quarter,” he said on a conference call following the company’s Q4 earnings release Thursday.
Real estate services revenue was $146.2 million, with $40.9 million from rentals and $28.4 million from mortgage. The company sold 474 RedfinNow homes in Q4 2023, bringing in an average of $538,788 per transaction. CFO Chris Nielsen said the company will save $20 million in gross profit losses.
Redfin stock fell about 4% in early trading Friday morning.
A turbulent 2022 also included two rounds of layoffs at Redfin, affecting nearly 1,300 employees, with Kelman penning a lengthy, emotional letter to the staff, at one point promising he would “spend the rest of my life wondering how I could’ve avoided these layoffs.”
Now, the company is focused on growing its brands, including the rental sector through media campaigns, with an increased emphasis on partner agents versus agents employed by the company.
“We decided to sell more demand to partners after accounting for costs that aren’t directly tied to a sale, but that still grow with the number of agents we employ, like the cost of human resources support and training for agents,” Kelman explained.
In Q4 2022, Redfin reported 12,743 real estate transactions through its brokerage services versus only 2,742 through partner agents.
Along with growth in the rental segment, Kelman said focusing on partnering with agents “will not only increase 2023 profits, but also limit layoffs and losses in future downturns.” He also emphasized web traffic, including the addition of ads to Redfin.com, and an expansion of mortgage and title services.
Despite the emphasis on partner agents, Kelman also lauded the performance of Redfin’s employee agents, who he claimed were more experienced and had better close rates in Q4 than they did earlier in the year.
“This tells us that even though the market is down, our sales execution is up. Beyond better service for customers who come to us via Redfin.com, our agents are also generating their own sales,” Kelman said.
Looking ahead, Redfin is projecting between $307 million and $324 million revenue for Q1 of this year, with a 31% decline in revenue from real estate services. Kelman said that the company would not offer full-year outlooks due to the volatility of the market, adding that he expects continued low inventory and affordability issues.
“Because of low inventory, we continue to believe that sales volume will be more volatile than home prices,” he said. “Once we recover from restructuring our business to be more profitable, our share gains will resume and accelerate. And if we can make money in a housing downturn, we’ll be in a good position to make a lot of money when the market recovers.”