Real estate technology company Redfin (NASDAQ:RDFN) beat Wall Street’s revenue expectations in Q4 CY2024, with sales up 12% year on year to $244.3 million. On the other hand, next quarter’s revenue guidance of $219.5 million was less impressive, coming in 10.4% below analysts’ estimates. Its GAAP loss of $0.29 per share was 21% below analysts’ consensus estimates.
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Redfin (RDFN) Q4 CY2024 Highlights:
“After recording our fourth straight quarter of revenue growth, with profits improving year-over-year in every business segment, we’re headed into 2025 with more demand, and a bigger and better sales force,” said Redfin CEO Glenn Kelman.
Company Overview
Founded by a former medical school student, electrical engineer, and Amazon data engineer, Redfin (NASDAQ:RDFN) is a real estate company offering brokerage services through an online platform.
Real Estate Services
Technology has been a double-edged sword in real estate services. On the one hand, internet listings are effective at disseminating information far and wide, casting a wide net for buyers and sellers to increase the chances of transactions. On the other hand, digitization in the real estate market could potentially disintermediate key players like agents who use information asymmetries to their advantage.
Sales Growth
Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Regrettably, Redfin’s sales grew at a sluggish 6% compounded annual growth rate over the last five years. This was below our standard for the consumer discretionary sector and is a poor baseline for our analysis.
Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. Redfin’s history shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 32.4% annually.
Redfin also discloses its number of brokerage transactions and partner transactions, which clocked in at 11,441 and 2,922 in the latest quarter. Over the last two years, Redfin’s brokerage transactions averaged 12.2% year-on-year declines while its partner transactions averaged 3.3% year-on-year declines.
This quarter, Redfin reported year-on-year revenue growth of 12%, and its $244.3 million of revenue exceeded Wall Street’s estimates by 0.7%. Company management is currently guiding for a 2.7% year-on-year decline in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 9.4% over the next 12 months. Although this projection indicates its newer products and services will catalyze better top-line performance, it is still below average for the sector.
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Cash Is King
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
Redfin broke even from a free cash flow perspective over the last two years, giving the company limited opportunities to return capital to shareholders.
Redfin’s free cash flow clocked in at $52.53 million in Q4, equivalent to a 21.5% margin. Its cash flow turned positive after being negative in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, causing temporary swings. Long-term trends trump fluctuations.
Over the next year, analysts predict Redfin will continue burning cash, albeit to a lesser extent. Their consensus estimates imply its free cash flow margin of negative 5% for the last 12 months will increase to negative 1.6%.
Key Takeaways from Redfin’s Q4 Results
We struggled to find many positives in these results as its EPS and EBITDA missed. Its revenue and EBITDA guidance for next quarter also fell short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock traded down 10.2% to $6.86 immediately after reporting.
Redfin’s latest earnings report disappointed. One quarter doesn’t define a company’s quality, so let’s explore whether the stock is a buy at the current price. If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free .