In its second earnings call since going public in July, web-based brokerage service Redfin announced a 35-percent spike in year-over-year revenue to $109.5 million and gross profits of $39.3 million, resulting in net income of $10.6 million for the third quarter, according to an earnings report from the company released Thursday afternoon.
Redfin Now, a four-month-old service that allows the brokerage to buy homes directly from customers, generated $3.4 million in revenue while traffic to the company’s website and mobile app grew 38 percent year-over-year, a deceleration from second-quarter growth of 43 percent.
“Redfin’s brokerage market-share gains accelerated again in the third quarter, with strong traffic growth and steadily increasing sales in all of our new businesses,” said Redfin CEO Glenn Kelman during the third-quarter earnings call. “We also invested in making our service better and more efficient over the coming years while delivering better-than-expected earnings in the quarter, pairing long-term thinking with financial discipline.”
Following two quarters of moderate hiring, from 1,010 agents in the first quarter of 2017 to 1,028 in the second, new recruiting was stagnant during the third quarter, when sales activity typical wanes. Kelman, however, emphasized 2018 would be a growth year, with accelerated third-quarter hiring in anticipation of higher traffic.
“Given growth and traffic and customers contacting our agents, we believe we would have had higher revenues if I hadn’t been so cautious about hiring agents this time last year,” he added.
Gross profits at Redfin, meanwhile, soared to $39.3 million, a 27-percent increase from $30.9 million in the third quarter of 2016, Kelman said, with total real estate revenue growing by 32 percent.
Redfin tallied a net income of $10.6 million, compared to $5.7 million during the same period last year. Depreciation and amortization grew to $1.8 million, up from $1.6 million in the third quarter of 2016.
Fourth-quarter revenue at Redfin is projected to hover between $89.2 million and $93.2 million, a potential growth of up to 40 percent compared to the fourth quarter of 2016, Kelman said. Net losses may clock in at $6 million, up from $5.3 million reported in the same period last year.
Launched in 2004, the Seattle-based company raised $138.5 million in its initial public offering, which had been viewed by many investors as a test balloon for a broader market of tech-forward real estate services like Compass, which this week announced $100 million in Series E funding. Breaking from traditional brokerages, Redfin has drawn criticism from investors for a commission model that charges home sellers as little as 1 percent as opposed to 3 percent on average. Analysts have questioned whether Redfin’s commission model can be profitable.
In 2016, Redfin reported losses of $22.5 million on revenue of $267.2 million, according to a prospectus filed in July with the Securities and Exchange Commission. In the first quarter of this year, the 13-year-old company reported losses of $28.1 million on $59.9 million in revenue.
Leading up to Thursday’s earnings report, shares of Redfin stock rose to $23.20. Shares are now trading 22 percent higher then when the company went public in July.
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