The US brokerage and discovery site operator Redfin has released a report on its results for the third quarter of its 2023 financial year. Notable points from the Seattle-based company's message to the market include:
Like many real estate brokerage companies operating in a slow U.S. real estate market, Redfin has been struggling to turn a profit for some time. However, CEO Glenn Kelman was keen to point out to shareholders that the company had been using the downturn to become more efficient and gain market share.
Although revenue was down year-on-year in Q3, the company saw increased profit metrics thanks to the comparison period encompassing losses from Redfin's iBuying business which was eventually shut down in November 2022.
"Our third-quarter results from continuing operations show how much more efficient we’ve become over the last year: revenue declined year over year by 12%, but gross profits increased by 8%, and adjusted EBITDA improved by $20 million, with improvements in nearly every segment. Including the gain from closing RedfinNow, the year-over-year increase in our adjusted EBITDA was $59 million."
Since undergoing three rounds of layoffs over 12 months, Redfin's brokerage business had not grown its market share. The third quarter of 2023 however saw the business grow slightly from 0.75% of all homes transacted to 0.78%.
There were also some positive signs from the company's rental business. Redfin paid $608 million to acquire the rental portal operator RentPath in 2021 with the business seeing its first profit since the takeover in Q3. Kelman also talked up the possibilities on the horizon for Redfin's new build segment thanks to a recently announced listing syndication partnership with Zillow.
As for Redfin's mortgage business, the outlook continues to be dampened by stubbornly high-interest rates. The rate of Redfin's brokerage customers that the company is able to sell a mortgage to remained broadly flat at 18% in Q3 with the company reiterating that, given more favourable conditions, it still expects to improve that rate to between 25% and 30%.
In his remarks to shareholders, Kelman did address the main narrative from the U.S. real estate portal industry. CoStar-owned Homes.com recently claimed to have overtaken Redfin and Realtor.com in terms of traffic. Kelman admitted that his company had begun monitoring the upstart portal's traffic but said that he was confident that Redfin could still add traffic share.
The quarter also saw Redfin controversially decide to leave the National Association of Realtors and start a pilot project to switch up its brokerage business model in certain markets.
The 'Redfin Max' program launched in Q3 sees the company go away from its principles of paying agents a fixed salary as the company looks to recruit top-performing agents on a commission-split basis in the lucrative markets of San Francisco and Los Angeles.