Release Date: February 27, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Redfin Corp (RDFN, Financial) reported a 12% increase in fourth-quarter revenue, reaching $244 million, marking the fourth consecutive quarter of growth.
- The company's sales force expanded by 25%, with new hires outperforming tenured agents in key sales metrics.
- A new partnership with Zillow is expected to double the number of high-quality apartment listings on Redfin's platform, enhancing competitiveness and strengthening the balance sheet with a $100 million payment.
- Redfin Corp (RDFN) plans to increase advertising spending by 38% in 2025, supported by increased profits from the Zillow partnership and recent layoffs, aiming to drive demand and market share.
- The company expects real estate gross margins to approach 30% in 2025, with significant improvements anticipated in the first and second quarters due to cost reductions and increased agent productivity.
Negative Points
- Redfin Corp (RDFN) reported an adjusted EBITDA loss of $3 million for the fourth quarter, which was below guidance due to higher-than-expected agent pay.
- The transition to the Redfin Next pay plan resulted in higher-than-expected one-time transition costs, impacting fourth-quarter profits.
- Real estate services market share remained flat year over year at 0.72%, with the company foregoing short-term share gains for expected future revenue growth.
- The company's first-quarter profits are expected to be down approximately $8 million year over year, partly due to a $17 million investment in advertising.
- Redfin Corp (RDFN) anticipates a significant decrease in rentals revenue as the Zillow partnership is implemented, although expenses are expected to decrease even more.
Q & A Highlights
Q: Can you explain the timing of the $40 million ad spend in Q1 and its impact on full-year EBITDA and free cash flow profitability?
A: Glenn Kelman, CEO: We're advertising early to capture homebuyers as they enter the market, aiming to be top of mind for listings. The ad campaign is already boosting demand, and we expect significant profitability in 2025. We've restructured to focus on growth, supported by the Zillow partnership, allowing us to invest in demand generation with a larger and better sales force.
Q: Can you provide more details on the lead agent count and its impact on sales?
A: Glenn Kelman, CEO: As of last week, our lead agent count exceeded 2,200, up 25% from Q3's average of 1,757. We've been successful in hiring experienced agents who are outperforming tenured agents in key sales metrics. The sales cycle is about six months, so new agents will start generating revenue in that timeframe.
Q: How will the Zillow partnership affect the rentals segment's revenue and profitability?
A: Christopher Nielsen, CFO: The partnership will shift our revenue model to primarily lead payments from Zillow and deferred revenue from their initial payment. While revenue will decrease, expenses will drop more significantly, tripling adjusted EBITDA from 2024 levels. We expect to run a larger marketplace with more leads and profit growth.
Q: What are the market share trends in older versus newer Redfin Next markets?
A: Glenn Kelman, CEO: We're encouraged by the success in older Next markets, especially in high-end areas. While we don't report specific market shares, the transition to Next has been positive. The agents hired through Next have strong metrics, supporting future share growth.
Q: How does the agent hiring strategy align with the marketing ramp-up for 2025?
A: Glenn Kelman, CEO: The marketing ramp-up reflects our confidence in the Next program and our desire to compete more aggressively for traffic. We've restructured to allocate more resources to growth, not necessarily due to macro improvements but to better fulfill demand with our enhanced agent capabilities.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
