Redfin Pushes New Agent Compensation Model, Reports Quarterly Declines

While Redfin reported losses during quarterly earnings reports in 2023, the company maintained a mood of cautious optimism. CEO Glen Kelman stressing any losses were controllable and downturns were predictable, while Redfin’s fundamentals remain strong with potential for growth.

Redfin reported its Q4 earnings on Tuesday, February 27, 2024, and the year-end summation reflected these previous quarters. The company reported a net loss of $22.9 million but noted a marked year-over-year improvement (Redfin’s net loss was $61.9 million in Q4 2022). 

Quarter 4 results

Redfin’s reported Q4 revenue was $218.1 million, a 2% decrease from Q4 2022 (counting only currently operating Redfin segments; Q4 2022 revenue included a substantial boost of $260 million after the company shut down its RedfinNow properties segment) and the latest result in a year of quarterly revenue declines. Real Estate Services generated a gross profit of $29.9 million, up 14% year-over-year.

Adjusted EBITA (earnings before interest, taxes, depreciation, and amortization) loss for Redfin in Q4 2023 was $13.5 million, a much healthier showing than its $40.2 million EBITA loss in Q4 2022. 

2023 results as a whole

Redfin’s full-year revenue for 2023 (from continuing operations) was $976.7 million, a decrease of 11% year over year. Gross profit was $329.8 million, an increase of 7% year-over-year. The total net loss for Redfin in 2023 was $130 million, which the company stressed as much less than its 2022 losses ($321.1 million).

Likewise, Redfin’s Adjusted EBITDA loss in 2023 was $76.4 million, whereas its adjusted EBITDA loss was $145.1 million in 2022.

The investors’ call

However, the company’s investor web call (attended by Kelman, Chief Financial Officer Chris Nielsen, and Head of Investor Relations Meg Nunnally) struck a theme of looking ahead to a brighter future.

In his opening comments, Kelman said: “The 4th quarter’s only disappointment was a market share decline, the share of home sales brokered by our own agents and through referrals to our partner agents was .72%, down from .76% in the fourth quarter of 2022 and .78% in the third quarter of 2023.” Otherwise, Kelman claims, results aligned with expectations – and Redfin’s troubles with market share already showed signs of recovery in January.

A primary topic of discussion on the call was Redfin Next, the company’s new agent compensation program (launched October 2023 in Los Angeles and San Francisco). Under Redfin Next, agents trade salaries in exchange for higher bonuses. “I have never seen so many employees lining up saying, ‘Please cut my salary so I can have a higher bonus,’” Kelman said in praise of the program.

He added that Redfin will be continuing the expansion of Redfin Next throughout 2024–it is currently on track to launch in San Diego and California’s Orange County. If the program proves successful, it could be the company-wide payment plan by 2025. “Next will allow us to be more aggressive about hiring. Because we have fewer fixed costs, we can add agent capacity,” added Redfin. During RE/MAX’s Q4 earnings call, the company likewise stressed agent count growth as a business priority.

Redfin reported 44 million monthly visitors to its website during Q4 2023, showing no change from the visitors reported in Q4 2022. However, there was continued optimism about the website. “The power of Redfin will be fully unleashed!” Kelman jokingly boasted, noting the company’s listing site will benefit as listing agents are encouraged to support consumer choice.

In projections for Q1 2024, Redfin estimates revenue between $214-223 million and a net loss between $65-72 million.

In October 2023, Redfin distanced itself from NAR, with Kelman resigning his board seat. Despite the move’s reverberations across the industry, this was not a topic of discussion during the call.

For the full Redfin Q4 earnings presentation, click here.

Source link

About The Author

Scroll to Top