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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2024
or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___ to ___
Commission file number 001-38160
Redfin Corporation
(Exact name of registrant as specified in its charter)

Delaware
74-3064240
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
1099 Stewart Street
Suite 600
Seattle
WA
98101
(Address of Principal Executive Offices)
(Zip Code)
(206)
576-8333
Registrant's telephone number, including area code
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, $0.001 par value per shareRDFNThe Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☒
Yes
☐
 No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
☒
Yes
☐
 No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
☒
Accelerated filer
☐
Non-accelerated filer  
☐
Smaller reporting company
☐
Emerging growth company
☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐
 Yes
☒
 No

The registrant had 123,980,474 shares of common stock outstanding as of November 1, 2024.


Redfin Corporation

Quarterly Report on Form 10-Q
For the Quarter Ended September 30, 2024

Table of Contents
PART I
Page
Item 1.
Item 2.
Item 3.
Item 4.
PART II
Item 1
Item 1A.
Item 5.
Item 6.


As used in this quarterly report, the terms "Redfin," "we," "us," and "our" refer to Redfin Corporation and its subsidiaries taken as a whole, unless otherwise noted or unless the context indicates otherwise. However, when referencing (i) the 2023 notes, the 2025 notes, and the 2027 notes, the terms “we,” “us,” and “our” refer only to Redfin Corporation and not to Redfin Corporation and its subsidiaries taken as a whole, (ii) the Apollo term loan, the terms “we,” “us,” and “our” refer only to Redfin Corporation and its subsidiaries except for Bay Equity LLC, taken as a whole, and (ii) each warehouse credit facility, the terms "we," "us," and "our" refer to Bay Equity LLC.

Note Regarding Forward-Looking Statements

This quarterly report contains forward-looking statements. All statements contained in this report other than statements of historical fact, including statements regarding our future operating results and financial position, our business strategy and plans, our market growth and trends, and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “could,” “would,” “project,” “plan,” "hope,” “potentially,” “preliminary,” “likely,” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including those described under Item 1A of our annual report for the year ended December 31, 2023 and Part II, Item 1A of our quarterly report for the quarter ended March 31, 2024. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the effect of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the future events and trends discussed in this report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Accordingly, you should not rely on forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, performance, or events and circumstances reflected in the forward-looking statements will be achieved or occur. We undertake no obligation to update any of these forward-looking statements for any reason after the date of this report or to conform these statements to actual results or revised expectations.

Note Regarding Industry and Market Data

This quarterly report contains information using industry publications that generally state that the information contained therein has been obtained from sources believed to be reliable, but such information may not be accurate or complete. While we are not aware of any misstatements regarding the information from these industry publications, we have not independently verified any of the data from third-party sources nor have we ascertained the underlying economic assumptions relied on therein.
i
Table of Contents
PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

Redfin Corporation and Subsidiaries
Consolidated Balance Sheets
(in thousands, except share and per share amounts, unaudited)
September 30, 2024December 31, 2023
Assets
Current assets
Cash and cash equivalents$165,660 $149,759 
Restricted cash174 1,241 
Short-term investments— 41,952 
Accounts receivable, net of allowances for credit losses of $3,945 and $3,234
74,971 51,738 
Loans held for sale212,921 159,587 
Prepaid expenses30,531 33,296 
Other current assets20,514 7,472 
Total current assets504,771 445,045 
Property and equipment, net43,312 46,431 
Right-of-use assets, net26,275 31,763 
Mortgage servicing rights, at fair value2,534 32,171 
Long-term investments— 3,149 
Goodwill461,349 461,349 
Intangible assets, net104,127 123,284 
Other assets, noncurrent8,705 10,456 
Total assets$1,151,073 $1,153,648 
Liabilities, mezzanine equity, and stockholders' (deficit) equity
Current liabilities
Accounts payable$14,280 $10,507 
Accrued and other liabilities101,040 90,360 
Warehouse credit facilities208,817 151,964 
Lease liabilities13,347 15,609 
Total current liabilities337,484 268,440 
Lease liabilities, noncurrent22,853 29,084 
Convertible senior notes, net, noncurrent571,644 688,737 
Term loan243,646 124,416 
Deferred tax liabilities647 264 
Total liabilities1,176,274 1,110,941 
Commitments and contingencies (Note 7)
Series A convertible preferred stock—par value $0.001 per share; 10,000,000 shares authorized; 40,000 shares issued and outstanding at September 30, 2024 and December 31, 2023
39,992 39,959 
Stockholders’ (deficit) equity
Common stock—par value $0.001 per share; 500,000,000 shares authorized; 123,945,380 and 117,372,171 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively
124 117 
Additional paid-in capital886,592 826,146 
Accumulated other comprehensive loss(140)(182)
Accumulated deficit(951,769)(823,333)
Total stockholders’ (deficit) equity(65,193)2,748 
Total liabilities, mezzanine equity, and stockholders’ (deficit) equity$1,151,073 $1,153,648 

See Notes to the consolidated financial statements.
1
Table of Contents
Redfin Corporation and Subsidiaries
Consolidated Statements of Comprehensive Loss
(in thousands, except share and per share amounts, unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Revenue$278,015 $268,956 $798,697 $758,595 
Cost of revenue176,152 170,616 516,436 501,927 
Gross profit101,863 98,340 282,261 256,668 
Operating expenses
Technology and development40,332 44,392 128,976 139,196 
Marketing27,186 24,095 92,324 97,531 
General and administrative58,788 55,380 181,366 186,584 
Restructuring and reorganization2,509 — 4,732 7,159 
Total operating expenses128,815 123,867 407,398 430,470 
Loss from continuing operations(26,952)(25,527)(125,137)(173,802)
Interest income1,839 2,060 5,132 8,170 
Interest expense(8,537)(1,603)(19,497)(5,291)
Income tax expense12 (239)(375)(882)
Gain on extinguishment of convertible senior notes— 6,495 12,000 68,848 
Other expense, net(144)(158)(559)(537)
Net loss from continuing operations(33,782)(18,972)(128,436)(103,494)
Net loss from discontinued operations— — — (3,634)
Net loss$(33,782)$(18,972)$(128,436)$(107,128)
Dividends on convertible preferred stock(282)(335)(706)(858)
Net loss from continuing operations attributable to common stock—basic and diluted$(34,064)$(19,307)$(129,142)$(104,352)
Net loss attributable to common stock—basic and diluted$(34,064)$(19,307)$(129,142)$(107,986)
Net loss from continuing operations per share attributable to common stock—basic and diluted$(0.28)$(0.17)$(1.07)$(0.93)
Net loss attributable to common stock per share—basic and diluted$(0.28)$(0.17)$(1.07)$(0.96)
Weighted-average shares to compute net loss per share attributable to common stock—basic and diluted122,876,102 114,592,679 120,553,264 112,141,342 
Net loss$(33,782)$(18,972)$(128,436)$(107,128)
Other comprehensive income
Foreign currency translation adjustments4 (15)2 (73)
Unrealized gain on available-for-sale debt securities
— 210 40 617 
Comprehensive loss$(33,778)$(18,777)$(128,394)$(106,584)

See Notes to the consolidated financial statements.

2
Table of Contents
Redfin Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands, unaudited)
Nine Months Ended September 30,
20242023
Operating Activities
Net loss
$(128,436)$(107,128)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization33,340 48,443 
Stock-based compensation53,942 55,382 
Amortization of debt discount and issuance costs2,280 2,873 
Non-cash lease expense9,046 12,909 
Impairment costs— 113 
Net gain on IRLCs, forward sales commitments, and loans held for sale(1,809)(1,767)
Change in fair value of mortgage servicing rights, net(742)1,065 
Gain on extinguishment of convertible senior notes(12,000)(68,848)
Other548 (2,013)
Change in assets and liabilities:
Accounts receivable, net(23,377)(238)
Inventory— 114,232 
Prepaid expenses and other assets(10,141)9,696 
Accounts payable3,802 177 
Accrued and other liabilities, deferred tax liabilities, and payroll tax liabilities, noncurrent11,772 (19,346)
Lease liabilities(11,993)(14,864)
Origination of mortgage servicing rights(170)(699)
Proceeds from sale of mortgage servicing rights30,549 1,122 
Origination of loans held for sale(3,071,291)(2,798,337)
Proceeds from sale of loans originated as held for sale3,018,634 2,858,656 
Net cash (used in) provided by operating activities(96,046)91,428 
Investing activities
Purchases of property and equipment(8,984)(9,235)
Purchases of investments— (76,866)
Sales of investments39,225 124,681 
Maturities of investments6,395 59,383 
Net cash provided by investing activities36,636 97,963 
Financing activities
Proceeds from the issuance of common stock pursuant to employee equity plans4,757 5,790 
Tax payments related to net share settlements on restricted stock units(1,574)(15,961)
Borrowings from warehouse credit facilities3,088,179 2,803,589 
Repayments to warehouse credit facilities(3,031,326)(2,861,779)
Principal payments under finance lease obligations(56)(73)
Repurchases of convertible senior notes(106,953)(212,401)
Repayments of convertible senior notes— (23,512)
Repayment of term loan principal(1,563)— 
Payments of debt issuance costs(2,222)— 
Proceeds from term loan125,000 — 
Net cash provided by (used in) financing activities74,242 (304,347)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash2 (73)
Net change in cash, cash equivalents, and restricted cash14,834 (115,029)
Cash, cash equivalents, and restricted cash:
Beginning of period(1)
151,000 242,246 
End of period(2)
$165,834 $127,217 
Supplemental disclosure of cash flow information
Cash paid for interest
$24,939 $13,540 
Non-cash transactions
Stock-based compensation capitalized in property and equipment3,327 3,173 

(1) Cash, cash equivalents, and restricted cash consisted of the following (beginning of period):
As of December 31,
20232022
Continuing operations
Cash and cash equivalents$149,759 $232,200 
Restricted cash1,241 2,406 
Total 151,000 234,606 
Discontinued operations
Cash and cash equivalents— 7,640 
Restricted cash— — 
Total— 7,640 
Total cash, cash equivalents, and restricted cash$151,000 $242,246 

(2) Cash, cash equivalents, and restricted cash consisted of the following (end of period):
As of September 30,
20242023
Continuing operations
Cash and cash equivalents$165,660 $125,803 
Restricted cash174 1,414 
Total165,834 127,217 
Discontinued operations
Cash and cash equivalents— — 
Restricted cash— — 
Total— — 
Total cash, cash equivalents, and restricted cash$165,834 $127,217 

See Notes to the consolidated financial statements.
3
Table of Contents
Redfin Corporation and Subsidiaries
Consolidated Statements of Changes in Mezzanine Equity and Stockholders’ (Deficit) Equity
(in thousands, except share amounts, unaudited)

Series A Convertible Preferred StockCommon StockAdditional Paid-in CapitalAccumulated DeficitAccumulated Other Comprehensive Loss
Total Stockholders'
(Deficit) Equity
SharesAmountSharesAmount
Balance, June 30, 202440,000 $39,981 121,743,620 $122 $865,263 $(917,987)$(144)$(52,746)
Issuance of convertible preferred stock, net— 11 — — — — — — 
Issuance of common stock as dividend on convertible preferred stock— — 30,640 — — — — — 
Issuance of common stock pursuant to employee stock purchase program— — — — — — — — 
Issuance of common stock pursuant to exercise of stock options— — 281,420 — 2,598 — — 2,598 
Issuance of common stock pursuant to settlement of restricted stock units— — 1,960,792 2 (2)— — — 
Common stock surrendered for employees' tax liability upon settlement of restricted stock units— — (71,092)— (633)— — (633)
Stock-based compensation— — — — 19,366 — — 19,366 
Other comprehensive income
— — — — — — 4 4 
Net loss— — — — — (33,782)— (33,782)
Balance, September 30, 2024
40,000 $39,992 123,945,380 $124 $886,592 $(951,769)$(140)$(65,193)
Balance, June 30, 202340,000 $39,936 113,934,673 $114 $791,302 $(781,463)$(452)$9,501 
Issuance of convertible preferred stock, net— 11 — — — — — — 
Issuance of common stock as dividend on convertible preferred stock— — 30,640 — — — — — 
Issuance of common stock pursuant to exercise of stock options— — 15,836 — 123 — — 123 
Issuance of common stock pursuant to settlement of restricted stock units— — 1,761,678 2 (2)— — — 
Common stock surrendered for employees' tax liability upon settlement of restricted stock units— — (531,829)(1)(4,862)— — (4,863)
Stock-based compensation— — — — 19,769 — — 19,769 
Other comprehensive income
— — — — — — 195 195 
Net loss— — — — — (18,972)— (18,972)
Balance, September 30, 202340,000 $39,947 115,210,998 $115 $806,330 $(800,435)$(257)$5,753 
4
Table of Contents

Series A Convertible Preferred StockCommon StockAdditional Paid-in CapitalAccumulated DeficitAccumulated Other Comprehensive Loss
Total Stockholders'
(Deficit) Equity
SharesAmountSharesAmount
Balance, December 31, 202340,000 $39,959 117,372,171 $117 $826,146 $(823,333)$(182)$2,748 
Issuance of convertible preferred stock, net— 33 — — — — — — 
Issuance of common stock as dividend on convertible preferred stock— — 91,920 — — — — — 
Issuance of common stock pursuant to employee stock purchase program— — 386,301 — 1,975 — — 1,975 
Issuance of common stock pursuant to exercise of stock options— — 310,968 — 2,783 — — 2,783 
Issuance of common stock pursuant to settlement of restricted stock units— — 5,990,918 7 (7)— — — 
Common stock surrendered for employees' tax liability upon settlement of restricted stock units— — (206,898)— (1,574)— — (1,574)
Stock-based compensation— — — — 57,269 — — 57,269 
Other comprehensive income— — — — — — 42 42 
Net loss— — — — — (128,436)— (128,436)
Balance, September 30, 2024
40,000 $39,992 123,945,380 $124 $886,592 $(951,769)$(140)$(65,193)
Balance, December 31, 202240,000 $39,914 109,696,178 $110 $757,951 $(693,307)$(801)$63,953 
Issuance of convertible preferred stock, net— 33 — — — — — — 
Issuance of common stock as dividend on convertible preferred stock— — 91,920 — — — — — 
Issuance of common stock pursuant to employee stock purchase program— — 1,150,703 1 4,214 — — 4,215 
Issuance of common stock pursuant to exercise of stock options— — 579,000 1 1,574 — — 1,575 
Issuance of common stock pursuant to settlement of restricted stock units— — 5,330,317 5 (5)— — — 
Common stock surrendered for employees' tax liability upon settlement of restricted stock units— — (1,637,120)(2)(15,959)— — (15,961)
Stock-based compensation— — — — 58,555 — — 58,555 
Other comprehensive income— — — — — — 544 544 
Net loss— — — — — (107,128)— (107,128)
Balance, September 30, 2023
40,000 $39,947 115,210,998 $115 $806,330 $(800,435)$(257)$5,753 

See Notes to the consolidated financial statements.
5
Table of Contents
Index to Notes to Consolidated Financial Statements

Note 1:
Note 2:
Note 3:
Note 4:
Note 5:
Note 6:
Note 7:
Note 8:
Note 9:
Note 10:
Note 11:
Note 12:
Note 13:
Note 14:
Note 15:
6
Index to Notes to Financial Statements
Redfin Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts, unaudited)

Note 1: Summary of Accounting Policies

Basis of Presentation—The consolidated financial statements and accompanying notes have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”).

The financial information as of December 31, 2023 that is included in this quarterly report is derived from the audited consolidated financial statements and notes for the year ended December 31, 2023 included in Item 8 in our annual report for the year ended December 31, 2023. Such financial information should be read in conjunction with the notes of the consolidated financial statements included in our annual report.

The unaudited consolidated interim financial statements, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, necessary to present fairly our financial position as of September 30, 2024, our statements of comprehensive loss, and statements of changes in mezzanine equity and stockholders’ (deficit) equity for the three and nine months ended September 30, 2024 and 2023, as well as our statements of cash flows for the nine months ended September 30, 2024 and 2023. The results for the three and nine months ended September 30, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or for any interim period or for any other future year.

Principles of Consolidation—The unaudited consolidated interim financial statements include the accounts of Redfin Corporation and our wholly owned subsidiaries. Intercompany transactions and balances have been eliminated.

Use of Estimates—The preparation of consolidated financial statements, in conformity with GAAP, requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and results of operations during the respective periods. Our estimates include, but are not limited to, valuation of deferred income taxes, stock-based compensation, capitalization of website and software development costs, the incremental borrowing rate for the determination of the present value of lease payments, recoverability of intangible assets with finite lives, fair value of our mortgage loans held for sale (“LHFS”) and mortgage servicing rights, estimated useful life of intangible assets, fair value of reporting units for purposes of allocating and evaluating goodwill for impairment, and current expected credit losses on certain financial assets. The amounts ultimately realized from the affected assets or ultimately recognized as liabilities will depend on, among other factors, general business conditions and could differ materially in the near term from the carrying amounts reflected in the consolidated financial statements.

Recently Adopted Accounting Pronouncements—None applicable.

Recently Issued Accounting Pronouncements—In September 2023, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance under ASU 2023-07, Segment Reporting - Improvements to Reportable Segment Disclosures. The ASU improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments in this ASU are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. We are currently evaluating the impact of this standard on our segment disclosures.

In December 2023, the FASB issued authoritative guidance under ASU 2023-09, Income Taxes - Improvements to Income Tax Disclosures. The ASU enhances annual income tax disclosures to address investor requests for more information about the tax risks and opportunities present in an entity’s worldwide operations. The two primary enhancements disaggregate existing income tax disclosures related to the effective tax rate reconciliation and income taxes paid. The amendments in this ASU are effective for annual periods beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the potential impact of the guidance on our financial statement disclosures.

7
Index to Notes to Financial Statements
Note 2: Discontinued Operations

In November 2022, our management and board of directors made the decision to wind down RedfinNow. The financial results of RedfinNow have historically been included in our properties segment. Winding-down RedfinNow was a strategic decision we made in order to focus our resources on our core businesses in the face of the rising cost of capital. The wind-down of our properties segment was complete as of June 30, 2023, at which time it met the criteria for discontinued operations in our consolidated financial statements.

As of September 30, 2024 and December 31, 2023 there were no major classes of assets and liabilities of our discontinued operations remaining.

The major classes of line items of the discontinued operations included in our consolidated statement of comprehensive loss were as follows for the three and nine months ended September 30, 2023:
Three Months Ended September 30, 2023
Nine Months Ended September 30, 2023
Revenue$— $122,576 
Cost of revenue
— 124,422 
Gross profit
— (1,846)
Operating expenses
Technology and development
— 552 
Marketing
— 523 
General and administrative
— 638 
Restructuring and reorganization— 75 
Total operating expenses
— 1,788 
Loss from discontinued operations
— (3,634)
Interest income, interest expense, income tax expense, and other expense, net
— — 
Net loss from discontinued operations$— $(3,634)
Net loss from discontinued operations per share—basic and diluted$0.00 $(0.03)

Significant non-cash items and capital expenditures of the discontinued operations were as follows for the nine months ended September 30, 2023:
Stock-based compensation$234 
Depreciation and amortization89 

Charges specifically relating to the wind-down of our properties segment were as follows:
Cost typeFinancial statement line itemNine Months Ended September 30, 2023
Cumulative amount recognized as of September 30, 2023
Employee termination costsRestructuring and reorganization$539 $8,587 
Asset write-offsRestructuring and reorganization— 493 
OtherRestructuring and reorganization(465)(890)
Acceleration of debt issuance costsInterest expense— 481 
Total$74 $8,671 

8
Index to Notes to Financial Statements
Note 3: Segment Reporting and Revenue

In its operation of our business, our management, including our chief operating decision maker ("CODM"), who is also our chief executive officer, evaluates the performance of our operating segments based on revenue, gross profit, operating income, and net (loss) income. We do not analyze discrete segment balance sheet information related to long-term assets, substantially all of which are located in the United States. We have five operating segments and three reportable segments, real estate services, rentals, and mortgage.

We generate revenue primarily from commissions and fees charged on each real estate services transaction closed by our lead agents or partner agents, from subscription-based product offerings for our rentals business, and from the origination, sales, and servicing of mortgages. Our key revenue components are brokerage revenue, partner revenue, rentals revenue, mortgage revenue, and other revenue.

Information on each of our reportable and other segments and reconciliation to net (loss) income from continuing operations is presented in the tables below. We have assigned certain previously reported expenses to each segment to conform to the way we internally manage and monitor our business. We allocated indirect costs to each segment based on a reasonable allocation methodology, when such costs are significant to the performance measures of the segments.
Three Months Ended September 30, 2024
Real estate servicesRentalsMortgageOtherCorporate overheadTotal
Revenue
$175,136 $51,660 $35,621 $15,598 $— $278,015 
Cost of revenue126,421 12,366 30,214 7,151 — 176,152 
Gross profit48,715 39,294 5,407 8,447 — 101,863 
Operating expenses
Technology and development26,927 10,648 675 889 1,193 40,332 
Marketing12,907 13,600 667 12 — 27,186 
General and administrative18,263 24,074 5,885 1,215 9,351 58,788 
Restructuring and reorganization— — — — 2,509 2,509 
Total operating expenses58,097 48,322 7,227 2,116 13,053 128,815 
(Loss) income from continuing operations(9,382)(9,028)(1,820)6,331 (13,053)(26,952)
Interest income, interest expense, income tax expense, gain on extinguishment of convertible senior notes, and other expense, net38 100 (2,966)266 (4,268)(6,830)
Net (loss) income from continuing operations$(9,344)$(8,928)$(4,786)$6,597 $(17,321)$(33,782)
9
Index to Notes to Financial Statements
Three Months Ended September 30, 2023
Real estate servicesRentalsMortgageOtherCorporate overheadTotal
Revenue
$177,750 $47,410 $32,923 $10,873 $— $268,956 
Cost of revenue123,684 10,824 29,629 6,479 — 170,616 
Gross profit54,066 36,586 3,294 4,394 — 98,340 
Operating expenses
Technology and development25,711 15,813 800 1,133 935 44,392 
Marketing10,785 12,245 1,088 20 (43)24,095 
General and administrative18,418 21,838 6,670 952 7,502 55,380 
Total operating expenses54,914 49,896 8,558 2,105 8,394 123,867 
(Loss) income from continuing operations
(848)(13,310)(5,264)2,289 (8,394)(25,527)
Interest income, interest expense, income tax expense, gain on extinguishment of convertible senior notes, and other expense, net
41 42 (73)207 6,338 6,555 
Net (loss) income from continuing operations
$(807)$(13,268)$(5,337)$2,496 $(2,056)$(18,972)

Nine Months Ended September 30, 2024
Real estate servicesRentalsMortgageOtherCorporate overheadTotal
Revenue
$493,885 $152,105 $109,619 $43,088 $— $798,697 
Cost of revenue371,198 35,453 88,646 21,139 — 516,436 
Gross profit122,687 116,652 20,973 21,949 — 282,261 
Operating expenses
Technology and development84,354 36,577 2,031 2,686 3,328 128,976 
Marketing47,939 42,137 2,221 27 — 92,324 
General and administrative57,178 66,794 19,087 3,279 35,028 181,366 
Restructuring and reorganization— — — — 4,732 4,732 
Total operating expenses189,471 145,508 23,339 5,992 43,088 407,398 
(Loss) income from continuing operations(66,784)(28,856)(2,366)15,957 (43,088)(125,137)
Interest income, interest expense, income tax expense, gain on extinguishment of convertible senior notes, and other expense, net6 65 (2,962)690 (1,098)(3,299)
Net (loss) income from continuing operations$(66,778)$(28,791)$(5,328)$16,647 $(44,186)$(128,436)
10
Index to Notes to Financial Statements
Nine Months Ended September 30, 2023
Real estate servicesRentalsMortgageOtherCorporate overheadTotal
Revenue(1)
$485,687 $135,636 $107,838 $29,434 $— $758,595 
Cost of revenue359,625 31,016 93,108 18,178 — 501,927 
Gross profit126,062 104,620 14,730 11,256 — 256,668 
Operating expenses
Technology and development82,650 48,081 2,177 3,475 2,813 139,196 
Marketing51,849 42,509 3,122 46 5 97,531 
General and administrative58,997 73,445 20,323 3,049 30,770 186,584 
Restructuring and reorganization— — — — 7,159 7,159 
Total operating expenses193,496 164,035 25,622 6,570 40,747 430,470 
(Loss) income from continuing operations
(67,434)(59,415)(10,892)4,686 (40,747)(173,802)
Interest income, interest expense, income tax expense, gain on extinguishment of convertible senior notes, and other expense, net
41 115 (224)475 69,901 70,308 
Net (loss) income from continuing operations
$(67,393)$(59,300)$(11,116)$5,161 $29,154 $(103,494)
(1) Included in revenue is $1,244 from providing services to our discontinued properties segment.

Note 4: Financial Instruments

Derivatives

Our primary market exposure is to interest rate risk, specifically U.S. treasury and mortgage interest rates, due to their impact on mortgage-related assets and commitments. We use forward sales commitments on whole loans and mortgage-backed securities to manage and reduce this risk. We do not have any derivative instruments designated as hedging instruments.

Forward Sales Commitments—We are exposed to interest rate and price risk on loans held for sale from the funding date until the date the loan is sold. Forward sales commitments on whole loans and mortgage-backed securities are used to fix the forward sales price that will be realized at the sale of each loan.

Interest Rate Lock Commitments—Interest rate lock commitments ("IRLCs") represent an agreement to extend credit to a mortgage loan applicant. We commit (subject to loan approval) to fund the loan at the specified rate, regardless of changes in market interest rates between the commitment date and the funding date. Outstanding IRLCs are subject to interest rate risk and related price risk during the period from the date of commitment through the loan funding date or expiration date. Loan commitments generally range between 30 and 90 days and the borrower is not obligated to obtain the loan. Therefore, IRLCs are subject to fallout risk, which occurs when approved borrowers choose not to close on the underlying loans. We review our commitment-to-closing ratio ("pull-through rate") as part of an estimate of the number of mortgage loans that will fund according to the IRLCs.

The notional amounts of our forward sales commitments and IRLCs were as follows:
InstrumentSeptember 30, 2024December 31, 2023
Forward sales commitments$384,797 $274,400 
IRLCs276,572 188,554 

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Index to Notes to Financial Statements
The locations and amounts of gains (losses) recognized in income related to our derivatives were as follows:
Three Months Ended September 30,Nine Months Ended September 30,
InstrumentClassification2024202320242023
Forward sales commitmentsRevenue$(792)$335 $1,144 $2,367 
IRLCsRevenue86 (1,567)(13)1,005 

Fair Value of Financial Instruments

A summary of assets and liabilities related to our financial instruments, measured at fair value on a recurring basis and as reflected in our consolidated balance sheets, is set forth below:
Balance at September 30, 2024Quoted Prices in Active Markets for Identical Assets (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)
Assets
Cash equivalents
Money market funds$114,617 $114,617 $— $— 
Total cash equivalents114,617 114,617 — — 
Loans held for sale212,921 — 212,921 — 
Other current assets
Forward sales commitments469 — 469 — 
IRLCs4,691 — — 4,691 
Total other current assets5,160 — 469 4,691 
Mortgage servicing rights, at fair value2,534 — — 2,534 
Total assets$335,232 $114,617 $213,390 $7,225 
Liabilities
Accrued liabilities
Forward sales commitments$1,755 $— $1,755 $— 
IRLCs252 — — 252 
Total liabilities$2,007 $— $1,755 $252 

12
Index to Notes to Financial Statements
Balance at December 31, 2023Quoted Prices in Active Markets for Identical Assets (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)
Assets
Cash equivalents
        Money market funds$115,276 $115,276 $— $— 
Total cash equivalents115,276 115,276 — — 
Short-term investments
   U.S. treasury securities10,720 10,720 — — 
Agency bonds31,232 31,232 — — 
Total short-term investments41,952 41,952 — — 
Loans held for sale159,587 — 159,587 — 
Other current assets
IRLCs4,600 — — 4,600 
Total other current assets4,600 — — 4,600 
Mortgage servicing rights, at fair value32,171 — — 32,171 
Long-term investments
U.S. treasury securities3,149 3,149 — — 
Total assets$356,735 $160,377 $159,587 $36,771 
Liabilities
Accrued liabilities
Forward sales commitments$2,429 $— $2,429 $— 
IRLCs147 — — 147 
Total liabilities$2,576 $— $2,429 $147 

There were no transfers into or out of Level 3 financial instruments during the periods presented.

The significant unobservable input used in the fair value measurement of IRLCs is the pull-through rate. Significant changes in the input could result in a significant change in fair value measurement.

The following is a quantitative summary of key unobservable inputs used in the valuation of IRLCs and Mortgage Servicing Rights (“MSRs”):
September 30, 2024December 31, 2023
Key InputsValuation TechniqueRangeWeighted-AverageRangeWeighted-Average
IRLCs
Pull-through rate
Market pricing
68.0% - 100.0%
90.5%
67.2% - 100.0%
87.7%
MSRs
Prepayment speedDiscounted cash flow
6.0% - 25.0%
8.5%
 6.0% - 19.0%
6.8%
Default ratesDiscounted cash flow
0.1% - 1.2%
0.2%
0.1% - 1.2%
0.2%
Discount rateDiscounted cash flow
10.0% - 18.0%
10.3%
10.0% - 17.0%
10.2%
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Index to Notes to Financial Statements

The following is a summary of changes in the fair value of IRLCs:
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Balance, net—beginning of period$4,353 $3,870 $4,453 $1,297 
Issuances of IRLCs14,245 10,638 43,569 39,769 
Settlements of IRLCs(14,616)(11,650)(44,025)(38,241)
Fair value changes recognized in earnings457 (556)442 (523)
Balance, net—end of period$4,439 $2,302 $4,439 $2,302 

The following is a summary of changes in the fair value of MSRs:
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Balance—beginning of period$2,695 $35,503 $32,171 $36,261 
MSRs originated86 120 170 699 
MSRs sales(1)
(46)(384)(30,549)(1,122)
Fair value changes recognized in earnings
(201)(466)742 (1,065)
Balance, net—end of period$2,534 $34,773 $2,534 $34,773 
(1) On May 31, 2024 we sold $30,038 of our MSRs to Freedom Mortgage Corporation.

The following table presents the estimated fair values of our convertible senior notes that are not recorded at fair value on our consolidated balance sheets:
September 30, 2024December 31, 2023
2025 notes$70,269 $164,113 
2027 notes367,896 325,927 

The estimated fair value of our convertible senior notes is based on the closing trading price of the notes on the last day of trading for the period and is classified as Level 2 within the fair value hierarchy due to the limited trading activity of the notes. See Note 14 for additional details on our convertible senior notes.

See Note 10 for the carrying amount of our convertible preferred stock.

Assets and liabilities recognized or disclosed at fair value on a nonrecurring basis include items such as property and equipment, goodwill and other intangible assets, and other assets. These assets are remeasured at fair value if determined to be impaired.

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Index to Notes to Financial Statements
The cost or amortized cost, gross unrealized gains and losses, and estimated fair market value of our cash, money market funds, restricted cash, and available-for-sale investments were as follows:
September 30, 2024
Fair Value HierarchyCost or Amortized CostUnrealized GainsUnrealized LossesEstimated Fair ValueCash, Cash Equivalents, and Restricted CashShort-term InvestmentsLong-term Investments
CashN/A$51,043 $— $— $51,043 $51,043 $— $— 
Money markets fundsLevel 1114,617 — — 114,617 114,617 — — 
Restricted cashN/A174 — — 174 174 — — 
Total$165,834 $— $— $165,834 $165,834 $— $— 
December 31, 2023
Fair Value HierarchyCost or Amortized CostUnrealized GainsUnrealized LossesEstimated Fair ValueCash, Cash Equivalents, and Restricted CashShort-term InvestmentsLong-term Investments
CashN/A$34,483 $— $— $34,483 $34,483 $— $— 
Money markets fundsLevel 1115,276 — — 115,276 115,276 — — 
Restricted cashN/A1,241 — — 1,241 1,241 — — 
U.S. treasury securitiesLevel 113,895 1 (27)13,869 — 10,720 3,149 
Agency bondsLevel 131,246 — (14)31,232 — 31,232 — 
Total$196,141 $1 $(41)$196,101 $151,000 $41,952 $3,149 

As of September 30, 2024 and December 31, 2023, we had no accrued interest and accrued interest of $332, respectively, on our available-for-sale investments, of which we have recorded no expected credit losses. Accrued interest receivable is recorded in other current assets in our consolidated balance sheets.

Note 5: Property and Equipment

The components of property and equipment were as follows:
Useful Lives (Years)September 30, 2024December 31, 2023
Leasehold improvementsShorter of lease term or economic life$27,712 $28,789 
Website and software development costs
3 - 5
86,839 75,573 
Computer and office equipment
3 - 5
14,758 16,175 
Software31,607 1,869 
Furniture77,320 7,754 
Property and equipment, gross138,236 130,160 
Accumulated depreciation and amortization(99,178)(89,275)
Construction in progress4,254 5,546 
Property and equipment, net$43,312 $46,431 

The following table summarizes depreciation and amortization and capitalized software development costs:
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Depreciation and amortization for property and equipment$4,779 $4,550 $14,182 $19,113 
Capitalized software development costs, including stock-based compensation3,082 3,854 11,647 12,700 

15
Index to Notes to Financial Statements
Note 6: Leases

We lease office space under noncancelable operating leases with original terms ranging from one to 11 years, and prior to September 30, 2024, vehicles under noncancelable finance leases with terms of four years. Generally, the operating leases require a fixed minimum rent with contractual minimum rent increases over the lease term. The components of lease expense were as follows:
Three Months Ended September 30,Nine Months Ended September 30,
Lease Cost2024202320242023
Operating lease cost:
Operating lease cost (cost of revenue)
$2,069 $2,586 $6,658 $8,279 
Operating lease cost (operating expenses)
1,210 1,269 3,639 6,247 
Short-term lease cost
573 751 1,908 2,339 
Sublease income
(435)(370)(1,370)(1,057)
Total operating lease cost$3,417 $4,236 $10,835 $15,808 
Finance lease cost:
Amortization of right-of-use assets$11 $17 $59 $48 
Interest on lease liabilities1 1 6 4 
Total finance lease cost$12 $18 $65 $52 
Operating
Total Lease Obligations
Maturity of Lease Liabilities
Lease Liabilities(2)
Other Leases
2024, excluding the nine months ended September 30, 2024
$4,066 $433 $4,499 
202513,970 499 14,469 
202611,393 37 11,430 
20276,436 — 6,436 
20281,859 — 1,859 
Thereafter882 — 882 
Total lease payments$38,606 $969 $39,575 
Less: Interest(1)
2,406 
Present value of lease liabilities$36,200 
(1) Includes interest on operating leases of $1,267 due within the next twelve months.
(2) Excludes sublease income. As of September 30, 2024, we expect sublease income of approximately $455 to be received for the remainder of fiscal year 2024.
Lease Term and Discount RateSeptember 30, 2024December 31, 2023
Weighted-average remaining operating lease term (years)
2.93.2
Weighted-average remaining finance lease term (years)
N/A2.5
Weighted-average discount rate for operating leases
4.5 %4.5 %
Weighted-average discount rate for finance leases
N/A5.4 %
Nine Months Ended September 30,
Supplemental Cash Flow Information20242023
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases$13,270 $16,539 
Operating cash flows from finance leases6 4 
Financing cash flows from finance leases49 39 
Right of use assets obtained in exchange for lease liabilities
Operating leases
$4,329 $7,490 
Finance leases69 59 

16
Index to Notes to Financial Statements
Note 7: Commitments and Contingencies

Legal Proceedings

Below is a discussion of our material, pending legal proceedings. Except as otherwise indicated, given the preliminary stage of these proceedings and the claims and issues presented, we cannot estimate a range of reasonably possible losses.

In addition, we are regularly subject to claims, litigation, and other proceedings, including potential regulatory proceedings, involving employment, intellectual property, privacy and data protection, consumer protection, competition and antitrust laws, and commercial or contractual disputes, and other matters. The outcomes of our legal proceedings and other contingencies are inherently unpredictable, subject to significant uncertainties, and could be material to our operating results and cash flows for a particular period. We evaluate, on a regular basis, developments in our legal proceedings and other contingencies that could affect the amount of liability, including amounts in excess of any previous accruals and reasonably possible losses disclosed, and make adjustments and changes to our accruals and disclosures as appropriate. For the matters we disclose that do not include an estimate of the amount of loss or range of losses, such an estimate is not possible or is immaterial, and we may be unable to estimate the possible loss or range of losses that could potentially result from the application of non-monetary remedies. Until the final resolution of such matters, if any of our estimates and assumptions change or prove to have been incorrect, we may experience losses in excess of the amounts recorded, which could have a material effect on our business, consolidated financial position, results of operations, or cash flows. Except for the matters discussed below, we do not believe that any of our pending litigation, claims, and other proceedings are material to our business.

Lawsuit by David Eraker—On May 11, 2020, David Eraker, our co-founder and former chief executive officer who departed Redfin in 2006, filed a complaint through Appliance Computing III, Inc. (d/b/a Surefield) ("Surefield"), which is a company that Mr. Eraker founded and that we believe he controls, in the U.S. District Court for the Western District of Texas, Waco Division. The complaint alleged that we were infringing four patents claimed to be owned by Surefield without its authorization or license. Surefield sought an unspecified amount of damages and an injunction against us offering products and services that allegedly infringe the patents at issue. On May 17, 2022, the jury returned a verdict in our favor, finding that we did not infringe any of the asserted claims of the patents claimed to be owned by Surefield, and accordingly, we do not owe any damages to Surefield. The jury also found that all asserted claims of Surefield’s claimed patents were invalid. The court entered final judgment on August 15, 2022. On September 12, 2022, Surefield filed a motion for judgment as a matter of law and a motion for a new trial. In the motions, Surefield asserts that no jury could have found non-infringement based on the trial record, among other things. We filed oppositions to the motions on October 3, 2022 and Surefield filed replies on October 21, 2022. On October 7, 2024, the court appointed a technical advisor to assist the court with the pending post-trial motions.

Lawsuits Alleging Misclassification—On August 28, 2019, Devin Cook, who was one of our former independent contractor licensed sales associates, whom we call associate agents, filed a complaint against us in the Superior Court of California, County of San Francisco. The plaintiff initially pled the complaint as a class action and alleged that we misclassified her as an independent contractor instead of an employee. The plaintiff also sought unspecified penalties pursuant to representative claims under California’s Private Attorney General Act ("PAGA"). On January 30, 2020, the plaintiff filed a first amended complaint dismissing her class action claim and asserting only claims under PAGA.

On November 20, 2020, Jason Bell, who was one of our former lead agents as well as a former associate agent, filed a complaint against us in the U.S. District Court for the Southern District of California. The complaint was pled as a class action and alleges that, (1) during the time he served as an associate agent, we misclassified him as an independent contractor instead of an employee and (2) during the time he served as a lead agent, we misclassified him as an employee who was exempt from minimum wage and overtime laws. The plaintiff also asserted representative claims under PAGA. The plaintiff sought unspecified amounts of unpaid overtime wages, regular wages, meal and rest period compensation, waiting time and other penalties, injunctive and other equitable relief, and plaintiff's attorneys' fees and costs.

17
Index to Notes to Financial Statements
On May 23, 2022, pursuant to a combined mediation, we settled the lawsuits brought by Ms. Cook and Mr. Bell for an aggregate of $3,000. On April 7, 2023, plaintiffs filed a motion for preliminary approval of the class settlements. The motion for preliminary approval of the class settlement was granted by the court on May 4, 2023. The motion for final approval of the class settlement was granted on November 28, 2023. The settlement funds have been paid and are being distributed to class members. The Court entered an order closing the case on July 19, 2024.

Lawsuits Alleging Antitrust Violations—Since October 2023, a number of class action lawsuits have been filed on behalf of putative classes of home buyers and home sellers against the National Association of Realtors, local real estate associations, multiple listing services, and various residential real estate brokerages in various federal districts in the United States. Some of these lawsuits name Redfin as a defendant, including:
•Don Gibson, et al. v. National Association of Realtors, et al., Case no. 4:23-cv-00788-SRB, filed on October 31, 2023 in United States District Court for the Western District of Missouri (the “Gibson Action”).
•Mya Batton et al. v. Compass, Inc., et al., Case no. 1:23-cv-15618, filed on November 2, 2023 in United States District Court for the Northern District of Illinois.
•1925 Hooper LLC, et al. v. The National Association of Realtors, et al., Case no. 1:23-cv-05392-SEG, filed on December 6, 2023 in the United States District Court for the Northern District of Georgia.
•Daniel Umpa v. The National Association of Realtors, et al., Case no. 4:23-cv-00945-FJG, filed on December 27, 2023 in the United States District Court for the Western District of Missouri (the “Umpa Action”).
•Nathaniel Whaley v. National Association of Realtors, et al., Case no. 2:24-cv-00105-GMN-MDC, filed on January 25, 2024 in the United States District Court for the District of Nevada.
•Angela Boykin v. National Association of Realtors, et al., Case No. 2:24-cv-00340, filed on February 16, 2024 in the United States District Court for the District of Nevada.
•Freedlund v. Redfin Corporation, et al., Case No. 2:24-cv-01561, filed on February 26, 2024 in the United States District Court for the Central District of California.
•Rajninder (Raven) Jutla, et al. v. Redfin Corporation, et al., Case No. 2:24-cv-00464, filed on April 1, 2024 in the United States District Court for the Eastern District of California and transferred on April 5, 2024, to the United States District Court for the Western District of Washington.

These lawsuits variously allege a conspiracy to fix prices stemming from a National Association of Realtors rule, which allegedly requires brokers to make a blanket, non-negotiable offer of buyer broker compensation when listing a property on a multiple listing service. The plaintiffs generally seek injunctive relief, unspecified damages under federal antitrust law, and unspecified damages under various state laws. The Judicial Panel on Multidistrict Litigation denied a motion to consolidate some of these cases as In re Real Estate Commission Antitrust Litigation, MDL No. 3100 on April 12, 2024. At this time, except as set forth below, we are unable to predict the potential outcome of these lawsuits.

On May 3, 2024, we entered into a settlement term sheet (the “Proposed Settlement”) and on June 26, 2024, we executed a settlement agreement (the “Settlement Agreement”) to resolve, on a nationwide basis, all claims asserted in the Gibson Action and the Umpa Action, each pending in the United States District Court for the Western District of Missouri. These two cases are collectively referred to as “The Lawsuits.” The Settlement Agreement resolves all claims in the Lawsuits and similar claims on behalf of home sellers on a nationwide basis against Redfin (the “Claims”) and releases Redfin, its subsidiaries and its employees and contractors from the Claims. Neither the Proposed Settlement nor the Settlement Agreement include any admissions of liability.

Under the Settlement Agreement, Redfin paid $9,250 (the “Settlement Amount”) into a qualified settlement fund on August 26, 2024. The Settlement Amount is included in other current assets and accrued and other liabilities in our consolidated balance sheets. In the first quarter of 2024, we recorded the Settlement Amount to general and administrative in our consolidated statements of comprehensive loss. Redfin also agreed to implement or continue certain practices outlined in the Settlement Agreement.

18
Index to Notes to Financial Statements
On July 15, 2024, the United States District Court for the Western District of Missouri issued an Order Granting Preliminary Approval of the Settlement Agreement and the court entered an Order granting final approval of the Settlement Agreement on November 4, 2024. The Settlement Agreement will become effective when the time period for filing an appeal expires without any appeals having been filed or, if an appeal is filed, when the Settlement Agreement is ultimately approved by the court of last resort through that appeal process. The deadline to file an appeal is December 4, 2024, and no appeal has been filed as of November 6, 2024.

Lawsuit Alleging Privacy Violations—We use evolving tools and technology, such as pixels, in the operation of our websites. We are from time to time involved in, and may in the future be subject to third-party claims alleging consumer data privacy violations. On June 25, 2024, Redfin was named in a putative class action lawsuit, Mata v. Redfin, Case No. 24-cv-1094L, filed in the United States District Court for the Southern District of California. The complaint alleges that Redfin has used tracking technologies on its website that shares information about visitors’ activity on the site and guided tour videos they watch with third parties, in violation of the federal Video Privacy Protection Act (VPPA) and the California Invasion of Privacy Act (CIPA). The complaint demands a jury trial and seeks: (i) an order certifying the class and subclass outlined in the complaint; (ii) an order declaring that our alleged conduct violates the VPAA and the CIPA; (iii) an award of statutory damages under the VPAA to the class and under CPAA to the subclass; (iv) for punitive damages; (v) for prejudgment interest; and (vi) for injunctive relief. On October 30, 2024, the court entered an order granting a joint motion to stay the case pending completion of Plaintiff’s individual arbitration. The parties are required to file a joint status report on or before February 5, 2025, updating the court on the status of the arbitration.

Lawsuit Alleging Violations of Pay Transparency Law—On July 24, 2024, Redfin was named in a putative class action lawsuit, Hancock v. Redfin, Case No. 24-2-16685-8 SEA in the Superior Court of the State of Washington, County of King. The complaint alleges Redfin failed to comply with Washington’s pay transparency law by failing to disclose the wage scale or salary range in each job posting. Plaintiff, individually and on behalf of the class seeks, (i) statutory damages of $5 to Plaintiff and each class member, (ii) costs and attorneys’ fees, (iii) preliminary and injunctive relief, (iv) declaratory relief, and (v) pre-and post-judgment interest. At this time we are unable to predict the potential outcome of this lawsuit.

Other Commitments

Our title and settlement business and our mortgage business each hold cash in escrow at third-party financial institutions on behalf of homebuyers and home sellers. As of September 30, 2024, we held $44,724 in escrow and did not record this amount on our consolidated balance sheets. We may be held contingently liable for the disposition of the cash we hold in escrow.

Note 8: Acquired Intangible Assets and Goodwill

Acquired Intangible Assets—The following table presents the gross carrying amount and accumulated amortization of intangible assets:
September 30, 2024December 31, 2023
Weighted-Average Useful Lives (Years)GrossAccumulated AmortizationNetGrossAccumulated AmortizationNet
Trade names9.3$82,690 $(31,365)$51,325 $82,690 $(24,290)$58,400 
Developed technology
3.3
66,340 (65,863)477 66,340 (59,883)6,457 
Customer relationships1081,360 (29,035)52,325 81,360 (22,933)58,427 
Total$230,390 $(126,263)$104,127 $230,390 $(107,106)$123,284 

Amortization expense amounted to $4,705 and $9,747 for the three months ended September 30, 2024 and 2023, respectively and $19,158 and $29,241 for the nine months ended September 30, 2024 and 2023, respectively.

19
Index to Notes to Financial Statements
The following table presents our estimate of remaining amortization expense for intangible assets that existed as of September 30, 2024:
2024, excluding the nine months ended September 30, 2024
$4,583 
202517,618 
202617,380 
202715,633 
202815,050 
Thereafter33,863 
Estimated remaining amortization expense$104,127 

Goodwill—The following table presents the carrying amount of goodwill by reportable segment:
Real Estate ServicesRentals
Mortgage
Total
Balance as of September 30, 2024 and December 31, 2023
$250,231 $159,151 $51,967 $461,349 

Note 9: Accrued and Other Liabilities

The components of accrued and other liabilities were as follows:
September 30, 2024December 31, 2023
Accrued compensation and benefits
$60,432 $58,836 
Miscellaneous accrued liabilities
22,249 26,037 
Legal contingencies11,500 — 
Customer contract liabilities6,859 5,487 
Total accrued and other liabilities
$101,040 $90,360 

Note 10: Mezzanine Equity

On April 1, 2020, we issued 4,484,305 shares of our common stock, at a price of $15.61 per share, and 40,000 shares of our preferred stock, at a price of $1,000 per share, for aggregate gross proceeds of $110,000. We designated this preferred stock as Series A Convertible Preferred Stock (our "convertible preferred stock"). Our convertible preferred stock is classified as mezzanine equity in our consolidated financial statements as the substantive conversion features at the option of the holder precludes liability classification. We have determined there are no material embedded features that require recognition as a derivative asset or liability.

We allocated the gross proceeds of $110,000 to the common stock issuance and the convertible preferred stock issuance based on the standalone fair value of the issuances, resulting in a fair valuation of $40,000 for the preferred stock, which is also the stated value of the mandatory redemption amount.

As of September 30, 2024, the carrying value of our convertible preferred stock, net of issuance costs, is $39,992, and holders have earned unpaid stock dividends in the amount of 30,640 shares of common stock. This stock dividend was issued on October 1, 2024. These shares are included in basic and diluted net loss from continuing operations per share attributable to common stock in Note 12. As of September 30, 2024, no shares of the preferred stock have been converted, and the preferred stock was not redeemable, nor probable to become redeemable in the future as there is a more than remote chance the shares will be automatically converted prior to the mandatory redemption date. The number of shares of common stock reserved for future issuance resulting from dividends, conversion, or redemption with respect to the preferred stock was 2,622,177 as of the issuance date.

20
Index to Notes to Financial Statements
Dividends—The holders of our convertible preferred stock are entitled to dividends. Dividends accrue daily based on a 360-day fiscal year at a rate of 5.5% per annum based on the issue price and are payable quarterly in arrears on the first business day following the end of each calendar quarter. Assuming we satisfy certain conditions, we will pay dividends in shares of common stock at a rate of the dividend payable divided by $17.95. If we do not satisfy such conditions, we will pay dividends in a cash amount equal to (i) the dividend shares otherwise issuable on the dividends multiplied by (ii) the volume-weighted average closing price of our common stock for the ten trading days preceding the date the dividends are payable.

Participation Rights—Holders of our convertible preferred stock are entitled to dividends paid and distributions made to holders of our common stock to the same extent as if such preferred stockholders had converted their shares of preferred stock into common stock and held such shares on the record date for such dividends and distributions.

Conversion—Holders may convert their convertible preferred stock into common stock at any time at a rate per share of preferred stock equal to the issue price divided by $19.51 (the "conversion price"). A holder that converts will also receive any dividend shares resulting from accrued dividends.

Our convertible preferred stock may also be automatically converted to shares of our common stock. If the closing price of our common stock exceeds $27.32 per share until 30 trading days prior to November 30, 2024, for each day of any 30 consecutive trading days, then each outstanding share of preferred stock will automatically convert into a number of shares of our common stock at a rate per share of preferred stock equal to the issue price divided by the conversion price. Upon an automatic conversion, a holder will also receive any dividend shares resulting from accrued dividends.

Redemption—On November 30, 2024, we will be required to redeem any outstanding shares of our convertible preferred stock, and each holder may elect to receive cash, shares of common stock, or a combination of cash and shares. If a holder elects to receive cash, we will pay, for each share of preferred stock, an amount equal to the issue price plus any accrued dividends. If a holder elects to receive shares, we will issue, for each share of preferred stock, a number of shares of common stock at a rate of the issue price divided by the conversion price plus any dividend shares resulting from accrued dividends.

A holder of our convertible preferred stock has the right to require us to redeem up to all shares of preferred stock it holds following certain events outlined in the document governing the preferred stock. If a holder redeems as the result of such events, such holder may elect to receive cash or shares of common stock, as calculated in the same manner as the mandatory redemption described above. Additionally, such holder will also receive, in cash or shares of common stock as elected by the holder, an amount equal to all scheduled dividend payments on the preferred stock for all remaining dividend periods from the date the holder gives its notice of redemption.

Liquidation Rights—Upon our liquidation, dissolution, or winding up, holders of our convertible preferred stock will be entitled to receive cash out of our assets prior to holders of the common stock.

Note 11: Equity and Equity Compensation Plans

Common Stock—As of September 30, 2024 and December 31, 2023, our amended and restated certificate of incorporation authorized us to issue 500,000,000 shares of common stock with a par value of $0.001 per share.

Preferred Stock—As of September 30, 2024 and December 31, 2023, our amended and restated certificate of incorporation authorized us to issue 10,000,000 shares of preferred stock with a par value of $0.001 per share.

Amended and Restated 2004 Equity Incentive Plan—We granted options under our 2004 Equity Incentive Plan, as amended (our "2004 Plan"), until July 26, 2017, when we terminated it in connection with our initial public offering. Accordingly, no shares are available for future issuance under our 2004 Plan. Our 2004 Plan continues to govern outstanding equity awards granted thereunder. The term of each stock option under the plan is no more than 10 years, and each stock option generally vests over a four-year period.

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Index to Notes to Financial Statements
2017 Equity Incentive Plan—Our 2017 Equity Incentive Plan (our "2017 EIP") became effective on July 26, 2017, and provides for the issuance of incentive and nonqualified common stock options and restricted stock units to employees, directors, and consultants. The number of shares of common stock initially reserved for issuance under our 2017 EIP was 7,898,159. The number of shares reserved for issuance under our 2017 EIP will increase automatically on January 1 of each calendar year beginning on January 1, 2018, and continuing through January 1, 2028, by the number of shares equal to the lesser of 5% of the total outstanding shares of our common stock as of the immediately preceding December 31 or an amount determined by our board of directors. The term of each stock option and restricted stock unit under the plan will not exceed 10 years, and each award generally vests between two and four years.

We have reserved shares of common stock for future issuance under our 2017 EIP as follows:
September 30, 2024December 31, 2023
Stock options issued and outstanding2,035,795 2,406,453 
Restricted stock units outstanding13,367,819 15,947,173 
Shares available for future equity grants10,700,678 7,991,532 
Total shares reserved for future issuance26,104,292 26,345,158 

2017 Employee Stock Purchase Plan—Our 2017 Employee Stock Purchase Plan (our "ESPP") was approved by our board of directors on July 27, 2017 and enables eligible employees to purchase shares of our common stock at a discount. Purchases will be accomplished through participation in discrete offering periods. We initially reserved 1,600,000 shares of common stock for issuance under our ESPP. The number of shares reserved for issuance under our ESPP will increase automatically on January 1 of each calendar year beginning after the first offering date and continuing through January 1, 2028, by the number of shares equal to the lesser of 1% of the total outstanding shares of our common stock as of the immediately preceding December 31 or an amount determined by our board of directors. On each purchase date, eligible employees will purchase our common stock at a price per share equal to 85% of the lesser of (i) the fair market value of our common stock on the first trading day of the offering period and (ii) the fair market value of our common stock on the purchase date.

We have reserved shares of common stock for future issuance under our ESPP as follows:
Nine Months Ended September 30, 2024
Year Ended December 31, 2023
Shares available for issuance at beginning of period4,378,0424,695,361
Shares issued during the period(386,301)(1,491,040)
Total shares available for future issuance at end of period3,991,7413,204,321

Stock Options—Option activity for the nine months ended September 30, 2024 was as follows:
Number of OptionsWeighted-Average Exercise PriceWeighted-Average Remaining Contractual Life (Years)Aggregate Intrinsic Value
Outstanding as of January 1, 2024
2,406,453$11.14 2.63$3,355 
Options exercised(310,968)8.83 
Options expired(59,690)7.76 
Outstanding as of September 30, 2024
2,035,79511.59 2.006,410 
Options exercisable as of September 30, 2024
2,035,79511.59 2.006,410 

The grant date fair value of our stock options was recorded as stock-based compensation over the stock options' vesting period. All outstanding options were fully vested as of September 30, 2024. We did not recognize any option-related expense during the nine months ended September 30, 2024.

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Index to Notes to Financial Statements
Restricted Stock Units—Restricted stock unit activity for the nine months ended September 30, 2024 was as follows:
Restricted Stock UnitsWeighted-Average Grant-Date Fair Value
Outstanding as of January 1, 202415,947,173 $9.64 
Granted5,627,462 6.89 
Vested(5,990,918)9.22 
Forfeited or canceled(2,215,898)10.88 
Outstanding or deferred as of September 30, 2024(1)
13,367,819 8.46 
(1) Starting with the restricted stock units granted to them in June 2019, our non-employee directors have the option to defer the issuance of common stock receivable upon vesting of such restricted stock units until 60 days following the day they are no longer providing services to us or, if earlier, upon a change in control transaction. The amount reported as vested excludes restricted stock units that have vested but whose settlement into shares has been deferred. The amount reported as outstanding or deferred as of September 30, 2024 includes these restricted stock units. As no further conditions exist to prevent the issuance of the shares of common stock underlying these restricted stock units, the shares are included in basic and diluted weighted shares outstanding used to calculate net loss per share attributable to common stock. The amount of shares whose issuance have been deferred is not considered material and is not reported separately from stock-based compensation in our consolidated statements of changes in mezzanine equity and stockholders’ (deficit) equity.

The grant date fair value of restricted stock units is recorded as stock-based compensation over the vesting period. As of September 30, 2024, there was $84,126 of total unrecognized compensation cost related to restricted stock units, which is expected to be recognized over a weighted-average period of 1.84 years.

As of September 30, 2024, there were 2,484,058 restricted stock units subject to performance and market conditions ("PSUs") at 100% of the target level. Depending on our achievement of the performance and market conditions, the actual number of shares of common stock issuable upon vesting of PSUs will range from 0% to 200% of the target amount. For each PSU recipient, the awards will vest only if the recipient is continuing to provide service to us upon our board of directors, or its compensation committee, certifying that we have achieved the PSU's related performance or market conditions. Stock-based compensation expense for PSUs with performance conditions is recognized when it is probable that the performance conditions will be achieved. For PSUs with market conditions, the market condition is reflected in the grant-date fair value of the award and the expense is recognized over the life of the award.

Stock-based compensation expense associated with the PSUs was as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
PSU expense$1,500 $1,224 $2,946 $4,405 
Reassessment of achievement of performance conditions(696)(588)(759)(780)
Total expense$804 $636 $2,187 $3,625 

Compensation Cost—Stock-based compensation, net of forfeitures and the amount capitalized in website and software development costs were as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Cost of revenue$2,819 $3,037 $8,603 $10,173 
Technology and development(1)
9,135 8,391 26,092 24,759 
Marketing1,131 1,337 3,911 3,836 
General and administrative5,217 6,035 15,336 16,380 
Stock-based compensation from continuing operations18,302 18,800 53,942 55,148 
Stock-based compensation from discontinued operations(1)
— — — 234 
Total stock-based compensation$18,302 $18,800 $53,942 $55,382 
(1) Net of $1,064 and $969 of stock-based compensation that was capitalized in the three months ended September 30, 2024 and 2023, respectively and $3,327 and $3,173 in the nine months ended September 30, 2024 and 2023, respectively.

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Index to Notes to Financial Statements
Note 12: Net Loss from Continuing Operations per Share Attributable to Common Stock

Net loss from continuing operations per share attributable to common stock is computed by dividing the net loss from continuing operations attributable to common stock by the weighted-average number of common shares outstanding. We have outstanding stock options, restricted stock units, options to purchase shares under our ESPP, convertible preferred stock, and convertible senior notes, which are considered in the calculation of diluted net loss from continuing operations per share whenever doing so would be dilutive.

We calculate basic and diluted net loss from continuing operations per share attributable to common stock in conformity with the two-class method required for companies with participating securities. We consider our convertible preferred stock to be participating securities. Under the two-class method, net loss from continuing operations attributable to common stock is not allocated to the preferred stock as its holders do not have a contractual obligation to share in losses, as discussed in Note 10.

The calculation of basic and diluted net loss from continuing operations per share attributable to common stock was as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Numerator:
Net loss from continuing operations$(33,782)$(18,972)$(128,436)$(103,494)
Dividends on convertible preferred stock(282)(335)(706)(858)
Net loss from continuing operations attributable to common stock—basic and diluted$(34,064)$(19,307)$(129,142)$(104,352)
Denominator:
Weighted-average shares—basic and diluted(1)
122,876,102 114,592,679 120,553,264 112,141,342 
Net loss from continuing operations per share attributable to common stock—basic and diluted$(0.28)$(0.17)$(1.07)$(0.93)
(1) Basic and diluted weighted-average shares outstanding include (i) common stock earned but not yet issued related to share-based dividends on our convertible preferred stock, and (ii) restricted stock units that have vested but whose settlement into common stock were deferred at the option of certain non-employee directors.

The following outstanding shares of common stock equivalents were excluded from the computation of the diluted net loss from continuing operations per share for the periods presented because their effect would have been anti-dilutive:
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
2025 notes as if converted(1)
1,017,284 3,234,293 1,017,284 3,234,293 
2027 notes as if converted(1)
5,379,209 6,147,900 5,379,209 6,147,900 
Convertible preferred stock as if converted2,040,000 2,040,000 2,040,000 2,040,000 
Stock options outstanding2,035,795 2,653,619 2,035,795 2,653,619 
Restricted stock units outstanding(2)(3)
13,276,376 13,605,240 13,276,376 13,605,240 
Employee stock purchase plan302,869 333,131 302,869 333,131 
Total24,051,533 28,014,183 24,051,533 28,014,183 
(1) Based on the closing price of our common stock of $12.53 on September 30, 2024, the if-converted values of both convertible notes were less than the principal amounts.
(2) Excludes 2,484,058 incremental PSUs that could vest, assuming applicable performance criteria and market conditions are achieved at 200% of target, which is the maximum achievement level. See Note 11 for additional information regarding PSUs.
(3) Excludes 91,443 restricted stock units that have vested but whose settlement into common stock were deferred at the option of certain non-employee directors as of September 30, 2024.

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Index to Notes to Financial Statements
Note 13: Income Taxes

During the nine months ended September 30, 2024, we recorded an income tax expense of $375 resulting in an effective tax rate of (0.29)%, which is primarily a result of current state income taxes. Our current income tax expense was supplemented by deferred tax expenses associated with increases to indefinite-lived deferred tax liabilities created through the Company’s April 2, 2021 acquisition of Rent., and April 1, 2022 acquisition of Bay Equity. Our September 30, 2023 effective tax rate of (0.85%) with respect to continuing operations, and (0.82)% with respect to our total net loss from both continuing and discontinued operations, is primarily a result of current state taxes which are supplemented by deferred tax expenses associated with increases to indefinite-lived deferred tax liabilities created through the Company’s April 2, 2021 acquisition of Rent., and April 1, 2022 acquisition of Bay Equity.

In determining the realizability of the net U.S. federal and state deferred tax assets, we consider numerous factors including historical profitability, estimated future taxable income, prudent and feasible tax planning strategies, and the industry in which we operate. Management reassesses the realization of the deferred tax assets each reporting period, which resulted in a valuation allowance against the full amount of our U.S. deferred tax assets for the nine months ended September 30, 2024 and 2023. To the extent that the financial results of our U.S. operations improve in the future and the deferred tax assets become realizable, we will reduce the valuation allowance through earnings.

Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, substantial changes in our ownership may limit the amount of net operating loss ("NOL") and income tax credit carryforwards that could be utilized annually in the future to offset taxable income and income tax liabilities. Any such annual limitation may significantly reduce the utilization of the NOLs and income tax credits before they expire. A Section 382 limitation study performed as of March 31, 2017 determined that we experienced an ownership change in 2006 with $1,506 of the 2006 NOL and $32 of the 2006 research and development tax credit unavailable for future use. Furthermore, in connection with our acquisition of Rent., Rent. experienced an ownership change that triggered Section 382. As of September 30, 2021, Rent. completed a Section 382 limitation study and, based on this analysis, we do not expect a reduction in the availability of Rent.'s pre-change NOLs.

As of December 31, 2023, we had accumulated approximately $642,212 of federal net operating losses, approximately $32,234 (tax effected) of state net operating losses, and approximately $5,363 of foreign net operating losses. Federal net operating losses are available to offset federal taxable income and begin to expire in 2024, with net operating loss carryforwards of $449,434 generated after 2017 available to offset future U.S. federal taxable income over an indefinite period.

Net research and development credit carryforwards of $23,968 and $23,240 are available as of December 31, 2023 and 2022, respectively, to reduce future liabilities. The research and development credit carryforwards begin to expire in 2026.

Deductible but limited federal business interest expense carryforwards of $149,464 and $145,296 are available as of December 31, 2023 and 2022, respectively, to offset future U.S. federal taxable income over an indefinite period.

Our material income tax jurisdiction is the United States (federal) and Canada (foreign). As a result of NOL carryforwards, we are subject to audit for all tax years for federal and foreign purposes. All tax years remain subject to examination in various other jurisdictions that are not material to our consolidated financial statements.

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Index to Notes to Financial Statements
Note 14: Debt

As of September 30, 2024, outstanding borrowings of our debt are as follows:
Maturity of Debt
Lender
2024
2025
2026
2027
2028
Thereafter
Warehouse Credit Facilities
City National Bank$45,374 $— $— $— $— $— 
Origin Bank48,577 — — — — — 
M&T Bank42,385 — — — — — 
Prosperity Bank72,481 — — — — — 
Term Loan
— — — — 243,646 — 
Convertible Senior Notes
2025 notes— 73,439 — — — — 
2027 notes— — — 498,205 — — 
Total borrowings
$208,817 $73,439 $— $498,205 $243,646 $— 

Warehouse Credit Facilities—To provide capital for the mortgage loans that it originates, our mortgage segment utilizes warehouse credit facilities that are classified as current liabilities on our consolidated balance sheets. Borrowings under each warehouse credit facility are secured by the related mortgage loan, and rights and income related to the loans.

Each warehouse credit facility contains various restrictive and financial covenants and provides that a breach or failure to satisfy these covenants constitutes an event of default.

The following table summarizes borrowings under these facilities as of the periods presented:
September 30, 2024December 31, 2023
LenderBorrowing CapacityOutstanding BorrowingsWeighted-Average Interest Rate on Outstanding BorrowingsBorrowing CapacityOutstanding BorrowingsWeighted-Average Interest Rate on Outstanding Borrowings
City National Bank$50,000 $45,374 6.72 %$50,000 $20,046 7.24 %
Origin Bank75,000 48,577 6.83 %75,000 30,110 7.25 %
M&T Bank50,000 42,385 6.83 %50,000 18,870 7.39 %
Prosperity Bank100,000 72,481 6.75 %75,000 29,358 7.23 %
Republic Bank & Trust CompanyN/AN/AN/A45,000 23,415 7.28 %
Wells Fargo Bank, N.A.N/AN/AN/A100,000 30,165 7.36 %
Total$275,000 $208,817 $395,000 $151,964 

Term Loan—On October 20, 2023, we entered into a definitive agreement with Apollo Capital Management, L.P. and its affiliates (“Apollo”) whereby Apollo agreed to commit up to $250,000 of financing for us in the form of a first lien term loan facility (the “facility”). We borrowed the first half of the facility on October 20, 2023, and the remaining $125,000 was available as a delayed draw term loan. On May 31, 2024, we drew down the remaining $125,000 of the facility.

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Index to Notes to Financial Statements
The facility is pre-payable at par, after 12 months of call protection (during which prepayment would be at 101% of par), or with respect to prepayments made with respect to a change of control, at 101% of par, and carries a five-year term, maturing October 20, 2028. Interest will be charged at the Secured Overnight Financing Rate (“SOFR”) +575 basis points for the first five full fiscal quarters after closing, with step-downs to SOFR +550 basis points and SOFR +525 basis points thereafter upon achieving agreed performance metrics. The facility requires that we maintain cash and cash equivalents of $75,000 which is tested on a quarterly basis. The negative covenants include restrictions on the incurrence of liens and indebtedness, investments, certain merger transactions, and other matters, all subject to certain exceptions. The effective interest rate for our term loan is 12.13%.

The facility includes customary events of default that, include among other things, non-payment of principal, interest or fees, inaccuracy of representations and warranties, violation of certain covenants, cross default to certain other indebtedness, bankruptcy and insolvency events, material judgments, change of control, and certain material ERISA events. The occurrence of an event of default could result in the acceleration of the obligations under the facility. In addition, the facility prohibits us from making any cash payments on the conversion or repurchase of our notes if an event of default exists under our term loan facility, or if, after giving effect to such conversion or repurchase, we would not be in compliance with the financial covenants under our term loan facility.

As security for our obligations under the facility, we granted Apollo a first priority security interest on substantially all of our assets and the assets of our material subsidiaries, subject to certain exceptions. Therefore, in a bankruptcy, Apollo first, and the holders of our convertible senior notes second, would have a claim to our assets senior to the claims of holders of our common stock.

As part of the transaction, we repurchased $5,000 principal amount of our 2025 convertible notes held by Apollo and $71,894 principal amount of 2027 convertible notes held by Apollo for an aggregate repurchase price of $57,075 using cash on our balance sheet. Additionally, we paid $2,471 in debt issuance costs in connection with the Apollo term loan, which is currently recorded in prepaid expenses on our consolidated balance sheet.

The components of the term loan were as follows:
September 30, 2024
Aggregate Principal AmountUnamortized Debt DiscountUnamortized Debt Issuance CostsNet Carrying Amount
$248,125 $2,745 $1,734 $243,646 
December 31, 2023
Aggregate Principal AmountUnamortized Debt DiscountUnamortized Debt Issuance CostsNet Carrying Amount
$124,688 $— $272 $124,416 

Convertible Senior Notes—We have issued convertible senior notes with the following characteristics:
IssuanceMaturity DateStated Cash Interest RateEffective Interest RateFirst Interest Payment DateSemi-Annual Interest Payment DatesConversion Rate
2025 notesOctober 15, 2025— %0.42 %——13.7920
2027 notesApril 1, 20270.50 %0.90 %October 1, 2021April 1; October 110.6920

We issued our 2025 notes on October 20, 2020, with an aggregate principal amount of $661,250. In the three months ended September 30, 2024, we did not repurchase any of our 2025 notes. In the nine months ended September 30, 2024, we repurchased and retired approximately $119,686 in aggregate principal amount of our 2025 notes at a price of $106,953 using available cash. In connection with these repurchases, we recorded a gain on extinguishment of debt of $12,000 for the nine months ended September 30, 2024.

We issued our 2027 notes on March 25, 2021 and April 5, 2021, with an aggregate principal amount of $575,000.
27
Index to Notes to Financial Statements

The components of our convertible senior notes were as follows:
September 30, 2024
IssuanceAggregate Principal Amount Unamortized Debt Issuance CostsNet Carrying Amount
2025 notes$73,759 $320 $73,439 
2027 notes503,106 4,901 498,205 
December 31, 2023
IssuanceAggregate Principal AmountUnamortized Debt Issuance CostsNet Carrying Amount
2025 notes$193,445 $1,443 $192,002 
2027 notes503,106 6,371 496,735 
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
2023 notes
Contractual interest expense$— $17 $— $223 
Amortization of debt issuance costs— 5 — 81 
Total interest expense$— $22 $— $304 
2025 notes
Contractual interest expense— — — — 
Amortization of debt issuance costs76 590 1,123 4,052 
Total interest expense$76 $590 $1,123 $4,052 
2027 notes
Contractual interest expense629 719 1,887 2,156 
Amortization of debt issuance costs490 560 1,470 1,680 
Total interest expense$1,119 $1,279 $3,357 $3,836 
Total
Contractual interest expense629 736 1,887 2,379 
Amortization of debt issuance costs566 1,155 2,593 5,813 
Total interest expense$1,195 $1,891 $4,480 $8,192 

Conversion of Our Convertible Senior Notes

Prior to the free conversion date, a holder of each tranche of our convertible senior notes may convert its notes in multiples of $1,000 principal amount only if one or more of the conditions described below is satisfied. On or after the free conversion date, a holder may convert its notes in such multiples without any conditions. The free conversion date is July 15, 2025 for our 2025 notes and January 1, 2027 for our 2027 notes.

The conditions are:
•during any calendar quarter (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the applicable conversion price on each applicable trading day;
28
Index to Notes to Financial Statements
•during the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of the applicable notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the applicable conversion rate on each such trading day;
•if we call any or all of the applicable notes for redemption, at any time prior to the close of business on the scheduled trading day prior to the redemption date; or
•upon the occurrence of specified corporate events.

We intend to settle any future conversions of our convertible senior notes by paying or delivering, as the case may be, cash, shares of our common stock, or a combination of cash and shares of our common stock, at our election. We apply the if-converted method to calculate diluted earnings per share when applicable. Under the if-converted method, the denominator of the diluted earnings per share calculation is adjusted to reflect the full number of common shares issuable upon conversion, while the numerator is adjusted to add back interest expense for the period. None of the above conditions were satisfied during the three months ended September 30, 2024.

Classification of Our Convertible Senior Notes

All of our convertible senior notes are accounted for as liabilities. The difference between the principal amount of the notes and the net carrying amount represents the unamortized debt discount, which we record as a deduction from the debt liability in our consolidated balance sheets. This discount is amortized to interest expense using the effective interest method over the term of the notes.

See Note 4 for fair value information related to our convertible senior notes.

Cross-acceleration and Cross-default Provisions of our Convertible Senior Notes, Term Loan, and Warehouse Credit Facilities—The indentures governing our 2025 and 2027 convertible senior notes contain cross-acceleration and cross-default provisions. These provisions could have the effect of creating an event of default under the indenture for either our 2025 or 2027 convertible senior notes, despite our compliance with that agreement, due solely to an event of default or failure to pay amounts owed under the indenture for the other tranche of convertible senior notes. Accordingly, all or a significant portion of our outstanding convertible senior notes could become immediately payable due solely to our failure to comply with the terms of a single agreement governing either our 2025 or 2027 convertible senior notes. In addition, each of our warehouse credit facilities and term loan facility contain cross-acceleration and cross-default provisions. These provisions could have the effect of creating an event of default under the agreement for any such facility, despite our compliance with that agreement, due solely to an event of default or failure to pay amounts owed under the agreement for another facility. Accordingly, all or a significant portion of our outstanding warehouse indebtedness or outstanding term loan indebtedness could become immediately payable due solely to our failure to comply with the terms of a single agreement governing one of our facilities. While the cross-default provisions in our existing warehouse credit facilities do not pick up defaults under our convertible senior notes and our existing warehouse credit facilities are carved out of the cross-payment default provisions in our 2025 and 2027 senior notes given that they constitute non-recourse debt, any default under our convertible senior notes would trigger an event of default under our term loan facility and, similarly, any default under our term loan facility would trigger the cross-payment default provisions in our 2025 and 2027 senior notes.

29
Index to Notes to Financial Statements
2027 Capped Calls—In 2021, and in connection with the pricing of our 2027 notes, we entered into capped call transactions with certain counterparties (the “2027 capped calls”). The 2027 capped calls have initial strike prices of $93.53 per share and initial cap prices of $138.56 per share, in each case subject to certain adjustments. Conditions that cause adjustments to the initial strike price and initial cap price of the 2027 capped calls are similar to the conditions that result in corresponding adjustments to the conversion rate for our 2027 notes. The 2027 capped calls cover, subject to anti-dilution adjustments, 6,147,900 shares of our common stock and are generally intended to reduce or offset the potential dilution to our common stock upon any conversion of the 2027 notes, with such reduction or offset, as the case may be, subject to a cap based on the cap price. The 2027 capped calls are separate transactions, and not part of the terms of our 2027 notes. As these instruments meet certain accounting criteria, the 2027 capped calls are recorded in stockholders’ (deficit) equity and are not accounted for as derivatives. The cost of $62,647 incurred in connection with the 2027 capped calls was recorded as a reduction to additional paid-in capital.

Note 15: Subsequent Events

On October 29th, 2024 we entered into a seven year contract with Amazon Web Services, Inc. for cloud computing services. The contract contains a minimum spend commitment of $240,000 over the contract period and replaces our existing contract with Amazon Web Services, Inc.

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Table of Contents
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements, the accompanying notes, and other information included in this quarterly report and our annual report for the year ended December 31, 2023. In particular, the disclosure contained in Item 1A in our annual report, as updated by Part II, Item 1A in our quarterly report for the quarter ended March 31, 2024, may reflect trends, demands, commitments, events, or uncertainties that could materially impact our results of operations and liquidity and capital resources.

The following discussion contains forward-looking statements, such as statements regarding our future operating results and financial position, our business strategy and plans, our market growth and trends, and our objectives for future operations. Please see "Note Regarding Forward-Looking Statements" for more information about relying on these forward-looking statements. The following discussion also contains information using industry publications. Please see "Note Regarding Industry and Market Data" for more information about relying on these industry publications.

When we use the term "basis points" in the following discussion, we refer to units of one-hundredth of one percent.

Overview

We help people buy and sell homes. Representing customers in approximately 100 markets in the United States and Canada, we are a residential real estate brokerage. We pair our own agents with our own technology to create a service that is faster, better, and costs less. We meet customers through our listings-search website and mobile application.

We use the same combination of technology and local service to originate and service mortgage loans and offer title and settlement services. We use digital platforms to connect consumers with available apartments and houses for rent.

Our mission is to redefine real estate in the consumer’s favor.

Adverse Macroeconomic Conditions and Our Associated Actions

Beginning in the second quarter of 2022 and continuing through the third quarter of 2024, a number of economic factors adversely impacted the residential real estate market, including higher mortgage interest rates, lower consumer sentiment, and increased inflation. This shift in the macroeconomic backdrop adversely impacted consumer demand for our services, as consumers weighed the financial implications of selling or purchasing a home and taking out a mortgage.

In response to these macroeconomic and consumer demand developments, we took action to adjust our operations and manage our business towards longer-term profitability despite these adverse macroeconomic factors.

From April 2022, after completing the acquisition of Bay Equity, through December 2023, through involuntary reductions and attrition, we reduced our total number of employees by 40%, including a reduction in lead agents of 40%. These workforce reductions were intended to align the size of our operations with the level of consumer demand for our services at that time.

In November of 2022, we decided to wind-down our properties segment, which included RedfinNow. This was a strategic decision we made in order to focus our resources on our core business in the face of the rising cost of capital. We completed the wind-down of our properties segment in the second quarter of 2023. Results for the properties segment are now reported in discontinued operations for all periods presented. The following discussion and analysis of our financial condition and results of operations include our continued operations for all periods presented.

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Numerous lawsuits have been filed on behalf of putative classes of homebuyers and home sellers against the National Association of Realtors (“NAR”), local real estate associations, multiple listing services, and various residential real estate brokerages in various federal districts in the United States. Some of these lawsuits name Redfin as a defendant.

On March 15, 2024, NAR entered a settlement agreement to resolve, on a class wide basis, the claims filed against NAR on behalf of putative classes of home sellers. In addition to a monetary payment of $418 million, NAR agreed to change certain business practices, including changes to cooperative compensation and buyer agreements. The NAR settlement agreement: (1) prohibits NAR and REALTOR® MLSs from requiring that listing brokers or sellers make offers of compensation to buyer brokers or other buyer representatives; (2) prohibits NAR, REALTOR® MLSs and MLS participants from making an offer of compensation on the MLS; and (3) requires all REALTOR® MLS participants to enter into a written buyer agreement specifying compensation before taking a buyer on tour.

These practice changes were implemented by August 17, 2024. It is unclear what impact these practice changes will have on our industry. It is possible that these changes, combined with increasing consumer awareness, may put downward pressure on the percentage commissions paid to buyers’ agents.

On May 3, 2024, we entered into a Proposed Settlement and on June 26, 2024, we signed the Settlement Agreement for a total of $9.25 million to resolve the Gibson Action and the Umpa Action and similar claims on behalf of home sellers against Redfin on a nationwide basis. Redfin paid the $9.25 million into a qualified settlement fund on August 26, 2024. On July 15, 2024, the United States District Court for the Western District of Missouri issued an Order Granting Preliminary Approval of the Settlement Agreement and the court entered an Order granting final approval of the Settlement Agreement on November 4, 2024. The Settlement Agreement will become effective when the time period for filing an appeal expires without any appeals having been filed or, if an appeal is filed, when the Settlement Agreement is ultimately approved by the court of last resort through that appeal process. The deadline to file an appeal is December 4, 2024, and no appeal has been filed as of November 6, 2024.

See Note 7 to our consolidated financial statements for descriptions of these cases and their potential impact.

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Key Business Metrics

In addition to the measures presented in our consolidated financial statements, we use the following key metrics to evaluate our business, develop financial forecasts, and make strategic decisions.
Three Months Ended
Sep. 30, 2024Jun. 30, 2024Mar. 31, 2024Dec. 31, 2023Sep. 30, 2023Jun. 30, 2023Mar. 31, 2023Dec. 31, 2022
Monthly average visitors (in thousands)49,413 51,619 48,803 43,861 51,309 52,308 50,440 43,847 
Real estate services transactions
Brokerage13,324 14,178 10,039 10,152 13,075 13,716 10,301 12,743 
Partner3,440 3,395 2,691 3,186 4,351 3,952 3,187 2,742 
Total16,764 17,573 12,730 13,338 17,426 17,668 13,488 15,485 
Real estate services revenue per transaction
Brokerage$12,363 $12,545 $12,433 $12,248 $12,704 $12,376 $11,556 $10,914 
Partner3,025 2,859 2,367 2,684 2,677 2,756 2,592 2,611 
Aggregate10,447 10,674 10,305 9,963 10,200 10,224 9,438 9,444 
U.S. market share by units
0.76 %0.77 %0.77 %0.72 %0.78 %0.75 %0.79 %0.76 %
Revenue from top-10 Redfin markets as a percentage of real estate services revenue56 %56 %55 %55 %56 %55 %53 %57 %
Average number of lead agents
1,757 1,719 1,658 1,692 1,744 1,792 1,876 2,022 
Mortgage originations by dollars (in millions)$1,214 $1,338 $969 $885 $1,110 $1,282 $991 $1,036 
Mortgage originations by units (in ones)2,900 3,192 2,365 2,293 2,786 3,131 2,444 2,631 

Monthly Average Visitors

The number of, and growth in, visitors to our website and mobile application are important leading indicators of our business activity because these channels are the primary ways we meet customers. The number of visitors is influenced by, among other things, market conditions that affect interest in buying or selling homes, the level and success of our marketing programs, seasonality, and how our website appears in search results. We believe we can continue to increase visitors, which helps our growth.

Given the lengthy process to buy or sell a home, a visitor during one month may not convert to a revenue-generating customer until many months later, if at all.

When we refer to "monthly average visitors" for a particular period, we are referring to the average number of unique visitors to our website and our mobile applications for each of the months in that period, as measured by Google Analytics, a product that provides digital marketing intelligence. Google Analytics tracks visitors using cookies, with a unique cookie being assigned to each browser or mobile application on a device. For any given month, Google Analytics counts all of the unique cookies that visited our website and mobile applications during that month. Google Analytics considers each unique cookie as a unique visitor. Due to third-party technological limitations, user software settings, or user behavior, it is possible that Google Analytics may assign a unique cookie to different visits by the same person to our website or mobile application. In such instances, Google Analytics would count different visits by the same person as separate visits by unique visitors. Accordingly, reliance on the number of unique cookies counted by Google Analytics may overstate the actual number of unique persons who visit our website or our mobile applications for a given month.

Our monthly average visitors exclude visitors to Rent.'s websites and mobile applications.

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Real Estate Services Transactions

We record a brokerage real estate services transaction when one of our lead agents represented the homebuyer or home seller in the purchase or sale, respectively, of a home. We record a partner real estate services transaction (i) when one of our partner agents represented the homebuyer or home seller in the purchase or sale, respectively, of a home or (ii) when a Redfin customer sold his or her home to a third-party institutional buyer following our introduction of that customer to the buyer. We include a single transaction twice when our lead agents or our partner agents serve both the homebuyer and the home seller of the transaction. Additionally, when one of our lead agents represents RedfinNow in its sale of a home, we include that transaction as a brokerage real estate services transaction. We completed the wind-down of our RedfinNow business in the second quarter of 2023.

Increasing the number of real estate services transactions is critical to increasing our revenue and, in turn, to achieving profitability. Real estate services transaction volume is influenced by, among other things, the pricing and quality of our services as well as market conditions that affect home sales, such as local inventory levels and mortgage interest rates. Real estate services transaction volume is also affected by seasonality and macroeconomic factors.

Real Estate Services Revenue per Transaction

Real estate services revenue per transaction, together with the number of real estate services transactions, is a factor in evaluating revenue growth. We also use this metric to evaluate pricing changes. Changes in real estate services revenue per transaction can be affected by, among other things, our pricing, the mix of transactions from homebuyers and home sellers, changes in the value of homes in the markets we serve, the geographic mix of our transactions, and the transactions we refer to partner agents and any third-party institutional buyer. We calculate real estate services revenue per transaction by dividing brokerage, partner, or aggregate revenue, as applicable, by the corresponding number of real estate services transactions in any period.

We generally generate more real estate services revenue per transaction from representing homebuyers than home sellers. However, we believe that representing home sellers has unique strategic value, including the marketing power of yard signs and other campaigns, and the market effect of controlling listing inventory.

Prior to July 2022, homebuyers who purchased their home using our brokerage services would receive a commission refund in a substantial majority of our markets. In July 2022, we began a pilot program in certain of those markets to eliminate our commission refund. Since this pilot was successful, we eliminated the standard commission refund we had historically provided in all markets in December 2022. The average refund per transaction for a homebuyer was $1,336 in 2022. The elimination of this commission refund increased our real estate services revenue per transaction in 2023, although this metric is also impacted by the factors discussed above. In September 2023, we began a pilot program in certain markets to provide a refund to homebuyers who sign a buyer agency agreement with us before their second home tour. We expanded this pilot program to more markets in the first quarter of 2024.

Beginning in August 2024, we set our fees for homebuyers based on prevailing competitive dynamics and customer response in the geographical regions where we operate. We further offer a discount to homebuyers who agree to work with our lead agents early in their home buying process. These direct fees are reflected in our real estate revenue per transaction for homebuyers.

U.S. Market Share by Units

Increasing our U.S. market share by units is critical to our ability to grow our business and achieve profitability over the long term. We believe there is a significant opportunity to increase our share in the markets we currently serve.

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We calculate our market share by aggregating the number of brokerage and partner real estate services transactions. We then divide that number by two times the aggregate number of U.S. home sales, in order to account for both the sell- and buy-side components of each home sale. We obtain the aggregate number of U.S. home sales from the National Association of REALTORS® ("NAR"). NAR data for the most recent period is preliminary and may subsequently be updated.

Revenue from Top-10 Markets as a Percentage of Real Estate Services Revenue

Our top-10 markets by real estate services revenue are the metropolitan areas of Boston, Chicago, Denver, Los Angeles (including Santa Barbara), Maryland, Northern Virginia, Portland (including Bend), San Diego, San Francisco, and Seattle. This metric is an indicator of the geographic concentration of our real estate services segment. We expect our revenue from top-10 markets to decline as a percentage of our total real estate services revenue over time.

Average Number of Lead Agents

The average number of lead agents, in combination with our other key metrics such as the number of brokerage transactions, is a basis for calculating agent productivity and is one indicator of the potential future growth of our business. We systematically evaluate traffic to our website and mobile application and customer activity to anticipate changes in customer demand, helping determine when and where to hire lead agents.

We calculate the average number of lead agents by taking the average of the number of lead agents at the end of each month included in the period.

Mortgage Originations

Mortgage originations is the volume of mortgage loans originated by our mortgage business, measured by both dollar value of loans and number of loans. This volume is an indicator for the growth of our mortgage business. Mortgage originations, including refinancings, are affected by mortgage interest rates, the ability of our mortgage loan officers to close loans, and the number of our homebuyer customers who use our mortgage business for a mortgage loan, among other factors.

Components of Our Results of Operations

Revenue

We generate revenue primarily from commissions and fees charged on each real estate services transaction closed by our lead agents or partner agents, from subscription-based product offerings for our rentals business, and from the origination, sales, and servicing of mortgages.

Real Estate Services Revenue

Brokerage Revenue—Brokerage revenue includes our offer and listing services, where our lead agents represent homebuyers and home sellers. We recognize commission-based brokerage revenue upon closing of a brokerage transaction, less the amount of any commission refunds, closing-cost reductions, or promotional offers that may result in a material right. Brokerage revenue is affected by the number of brokerage transactions we close, the mix of brokerage transactions, home-sale prices, commission rates, and the amount we give to customers.

Partner Revenue—Partner revenue consists of fees paid to us from partner agents or under other referral agreements, less the amount of any payments we make to homebuyers and home sellers. We recognize these fees as revenue on the closing of a transaction. Partner revenue is affected by the number of partner transactions closed, home-sale prices, commission rates, and the amount we refund to customers. If the portion of customers we introduce to our own lead agents increases, we expect the portion of revenue closed by partner agents to decrease.

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Rentals Revenue

Rentals Revenue—Rentals revenue is primarily composed of subscription-based product offerings for internet listing services, as well as lead management and digital marketing solutions. Rentals revenue is affected by the number of product offerings sold, pricing for each product, customer retention, and the mix of product offerings sold to our customers.

Mortgage Revenue

Mortgage Revenue—Mortgage revenue includes fees from the origination and subsequent sale of loans, loan servicing income, interest income on loans held for sale, origination of IRLCs, and the changes in fair value of our IRLCs, forward sales commitments, loans held for sale, and MSRs. Mortgage revenue is affected by loan volume, loan pricing, and market factors that impact the fair value of our MSRs and loans held for sale.

Other Revenue

Other Revenue—Other services revenue includes fees earned from title settlement services, Walk Score data services, and advertising. Substantially all fees and revenue from other services are recognized when the service is provided.

Cost of Revenue and Gross Margin

Cost of revenue consists primarily of personnel costs (including base pay, benefits, and stock-based compensation), transaction bonuses, home-touring and field expenses, listing expenses, customer fulfillment costs related to our rentals segment, office and occupancy expenses, interest expense on our mortgage related warehouse facilities, and depreciation and amortization related to fixed assets and acquired intangible assets.

Gross profit is revenue less cost of revenue. Gross margin is gross profit expressed as a percentage of revenue. Our gross margin has and will continue to be affected by a number of factors, but the most important are the mix of revenue from our segments, real estate services revenue per transaction, agent and support-staff productivity, and personnel costs and transaction bonuses.

Operating Expenses

Technology and Development

Our primary technology and development expenses are building software for our customers, lead agents, and support staff to work together on a transaction, and building a website and mobile application to meet customers looking to move. These expenses primarily include personnel costs (including base pay, bonuses, benefits, and stock-based compensation), data licenses, software and equipment, and infrastructure such as for data centers and hosted services. The expenses also include amortization of capitalized internal-use software and website and mobile application development costs as well as amortization of acquired intangible assets. We expense research and development costs as incurred and record them in technology and development expenses.

Marketing

Marketing expenses consist primarily of media costs for online and offline advertising, as well as personnel costs (including base pay, benefits, and stock-based compensation).

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General and Administrative

General and administrative expenses consist primarily of personnel costs (including base pay, benefits, and stock-based compensation), facilities costs and related expenses for our executive, finance, human resources, and legal organizations, depreciation related to our fixed assets, and fees for outside services. Outside services are principally composed of external legal, audit, and tax services. For our rentals business, personnel costs include employees in the sales department. These employees are responsible for attracting potential rental properties and agreeing to contract terms, but they are not responsible for delivering a service to the rental property.

Restructuring and Reorganization

Restructuring and reorganization expenses consist primarily of personnel-related costs associated with employee terminations, furloughs, or retention payments associated with wind-down activities.

Interest Income, Interest Expense, Income Tax Expense, Gain on Extinguishment of Convertible Senior Notes, and Other Expense, Net

Interest Income

Interest income consists primarily of interest earned on our cash, cash equivalents, and investments, and interest income related to originated mortgage loans.

Interest Expense

Interest expense consists primarily of interest payable and the amortization of debt discounts and issuance costs related to our convertible senior notes and term loan. See Note 14 to our consolidated financial statements for information regarding interest on our convertible senior notes.

Interest expense also includes interest on borrowings and the amortization of debt issuance costs related to our warehouse credit facilities. See Note 14 to our consolidated financial statements for information regarding interest for the facility.

Income Tax Expense

Income tax expense primarily relates to federal, state, and local taxes recorded.

Gain on Extinguishment of Convertible Senior Notes

Gain on extinguishment of convertible senior notes relates to gains recognized on the repurchase of our convertible senior notes. See Note 14 to our consolidated financial statements for information regarding our convertible senior notes.

Other Expense, Net

Other expense, net consists primarily of realized and unrealized gains and losses on investments and other assets, including impairment costs on our subleases. See Note 4 to our consolidated financial statements for information regarding unrealized gains and losses on our investments.

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Results of Operations

The following tables set forth our results of operations for the periods presented and as a percentage of our revenue for those periods.
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
(in thousands)
Revenue$278,015 $268,956 $798,697 $758,595 
Cost of revenue(1)
176,152 170,616 516,436 501,927 
Gross profit101,863 98,340 282,261 256,668 
Operating expenses
Technology and development(1)
40,332 44,392 128,976 139,196 
Marketing(1)
27,186 24,095 92,324 97,531 
General and administrative(1)
58,788 55,380 181,366 186,584 
Restructuring and reorganization2,509 — 4,732 7,159 
Total operating expenses
128,815 123,867 407,398 430,470 
Loss from continuing operations(26,952)(25,527)(125,137)(173,802)
Interest income
1,839 2,060 5,132 8,170 
Interest expense
(8,537)(1,603)(19,497)(5,291)
Income tax expense12 (239)(375)(882)
Gain on extinguishment of convertible senior notes— 6,495 12,000 68,848 
Other expense, net(144)(158)(559)(537)
Net loss from continuing operations$(33,782)$(18,972)$(128,436)$(103,494)

(1) Includes stock-based compensation as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
(in thousands)
Cost of revenue$2,819 $3,037 $8,603 $10,173 
Technology and development9,135 8,391 26,092 24,759 
Marketing1,131 1,337 3,911 3,836 
General and administrative5,217 6,035 15,336 16,380 
Total stock-based compensation from continuing operations$18,302 $18,800 $53,942 $55,148 
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
(as a percentage of revenue)
Revenue100.0 %100.0 %100.0 %100.0 %
Cost of revenue(1)
63.4 63.4 64.7 66.2 
Gross profit36.6 36.6 35.3 33.8 
Operating expenses
Technology and development(1)
14.5 16.5 16.1 18.3 
Marketing(1)
9.8 9.0 11.6 12.9 
General and administrative(1)
21.1 20.6 22.7 24.6 
Restructuring0.9 0.0 0.6 0.9 
Total operating expenses46.3 46.1 51.0 56.7 
Loss from continuing operations(9.7)(9.5)(15.7)(22.9)
Interest income
0.7 0.8 0.6 1.1 
Interest expense
(3.1)(0.6)(2.4)(0.7)
Income tax expense— (0.1)— (0.1)
Gain on extinguishment of convertible senior notes— 2.4 1.5 9.1 
Other expense, net(0.1)(0.1)(0.1)(0.1)
Net loss from continuing operations(12.2)%(7.1)%(16.1)%(13.6)%
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(1) Includes stock-based compensation as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
(as a percentage of revenue)
Cost of revenue1.0 %1.1 %1.1 %1.3 %
Technology and development3.3 3.1 3.3 3.3 
Marketing0.4 0.5 0.5 0.5 
General and administrative1.9 2.3 1.9 2.2 
Total6.6 %7.0 %6.8 %7.3 %

Comparison of the Three Months Ended September 30, 2024 and 2023

Revenue
Three Months Ended September 30,Change
20242023DollarsPercentage
(in thousands, except percentages)
Real estate services
Brokerage$164,729 $166,104 $(1,375)(1)%
Partner10,407 11,646 (1,239)(11)
Total real estate services175,136 177,750 (2,614)(1)
Rentals51,660 47,410 4,250 9 
Mortgage35,621 32,923 2,698 8 
Other15,598 10,873 4,725 43 
Total revenue$278,015 $268,956 $9,059 3 
Percentage of revenue
Real estate services
Brokerage59.3 %61.8 %
Partner3.7 4.3 
Total real estate services63.0 66.1 
Rentals18.6 17.6 
Mortgage12.8 12.2 
Other5.6 4.1 
Total revenue100.0 %100.0 %

In the three months ended September 30, 2024, revenue increased by $9.1 million, or 3%, as compared with the same period in 2023. This increase in revenue was primarily attributable to a $4.7 million increase in other segment revenue, a $4.3 million increase in rentals revenue, and a $2.7 million increase in mortgage revenue. This was partially offset by a $2.6 million decrease in real estate services revenue. Brokerage revenue decreased by $1.4 million, and partner revenue decreased by $1.2 million. Brokerage revenue decreased 1% during the period, driven by a 2% increase in brokerage transactions and a 3% decrease in brokerage revenue per transaction.

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Cost of Revenue and Gross Margin
Three Months Ended September 30,
Change
20242023
Dollars
Percentage
(in thousands, except percentages)
Cost of revenue
Real estate services$126,421 $123,684 $2,737 2 %
Rentals12,366 10,824 1,542 14 
Mortgage30,214 29,629 585 2 
Other7,151 6,479 672 10 
Total cost of revenue$176,152 $170,616 $5,536 3 
Gross profit
Real estate services$48,715 $54,066 $(5,351)(10)%
Rentals39,294 36,586 2,708 7 
Mortgage5,407 3,294 2,113 64 
Other8,447 4,394 4,053 92 
Total gross profit$101,863 $98,340 $3,523 4 
Gross margin (percentage of revenue)
Real estate services27.8 %30.4 %
Rentals76.1 77.2 
Mortgage15.2 10.0 
Other54.2 40.4 
Total gross margin36.6 36.6 

In the three months ended September 30, 2024, total cost of revenue increased by $5.5 million, or 3%, as compared with the same period in 2023. This increase in cost of revenue was primarily attributable to a $5.0 million increase in personnel costs, transaction bonuses, and home-touring and field expenses.

In the three months ended September 30, 2024, total gross margin was unchanged as compared with the same period in 2023, driven primarily by increases in mortgage and other gross margins, and the relative growth of our rentals business compared to our other businesses. This was partially offset by a decrease in real estate services and rentals gross margins.

In the three months ended September 30, 2024, real estate services gross margin decreased 260 basis points as compared with the same period in 2023. This was primarily attributable to a 500 basis point increase in personnel costs and transaction bonuses, partially offset by a 220 basis point decrease in home-touring and field expenses, each as a percentage of revenue, as we have eliminated compensation for home-touring and field expenses and replaced it with transaction bonuses for some employee agents.

In the three months ended September 30, 2024, rentals gross margin decreased 110 basis points as compared with the same period in 2023.

In the three months ended September 30, 2024, mortgage gross margin increased 520 basis points as compared with the same period in 2023. This was primarily attributable to a 360 basis point decrease in personnel costs and transaction bonuses and a 150 basis point decrease in office and occupancy expenses, each as a percentage of revenue.

In the three months ended September 30, 2024, other gross margin increased 1,380 basis points as compared with the same period in 2023. This was primarily attributable to a 690 basis point decrease in personnel costs and transaction bonuses as a percentage of revenue, driven by revenue growth.

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Operating Expenses
Three Months Ended September 30,
Change
20242023DollarsPercentage
(in thousands, except percentages)
Technology and development$40,332 $44,392 $(4,060)(9)%
Marketing27,186 24,095 3,091 13 
General and administrative58,788 55,380 3,408 6 
Restructuring2,509 — 2,509 N/A
Total operating expenses$128,815 $123,867 $4,948 4 
Percentage of revenue
Technology and development14.5 %16.5 %
Marketing9.8 9.0 
General and administrative21.1 20.6 
Restructuring and reorganization0.9 0.0 
Total operating expenses46.3 %46.1 %

In the three months ended September 30, 2024, technology and development expenses decreased by $4.1 million, or 9%, as compared with the same period in 2023. The decrease was primarily attributable to a $4.3 million decrease in amortization expense, as the intangible technology assets acquired with Rent. completed their amortization.

In the three months ended September 30, 2024, marketing expenses increased by $3.1 million, or 13%, as compared with the same period in 2023. The increase was primarily attributable to a $3.7 million increase in marketing media costs. This was partially offset by a $0.7 million decrease in personnel costs.

In the three months ended September 30, 2024, general and administrative expenses increased by $3.4 million, or 6%, as compared with the same period in 2023. This was primarily attributable to a $1.0 million increase in legal settlements, and a $1.1 million increase in legal services expenses.

In the three months ended September 30, 2024, restructuring and reorganization expenses increased by $2.5 million as compared with the same period in 2023.

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Interest Income, Interest Expense, Income Tax Expense, Gain on Extinguishment of Convertible Senior Notes, and Other Expense, Net
Three Months Ended September 30,Change
20242023DollarsPercentage
(in thousands, except percentages)
Interest income$1,839 $2,060 $(221)(11)%
Interest expense(8,537)(1,603)(6,934)433 
Income tax expense12 (239)251 (105)
Gain on extinguishment of convertible senior notes— 6,495 (6,495)(100)
Other expense, net(144)(158)14 (9)
Interest income, interest expense, income tax expense, gain on extinguishment of convertible notes, and other expense, net$(6,830)$6,555 $(13,385)(204)
Percentage of revenue
Interest income0.7 %0.8 %
Interest expense(3.1)(0.6)
Income tax expense0.0 (0.1)
Gain on extinguishment of convertible senior notes0.0 2.4 
Other expense, net(0.1)(0.1)
Interest income, interest expense, income tax expense, gain on extinguishment of convertible notes, and other expense, net(2.5)%2.4 %

In the three months ended September 30, 2024, interest income, interest expense, income tax expense, gain on extinguishment of convertible senior notes, and other expense, net decreased by $13.4 million as compared to the same period in 2023.

Interest expense increased by $6.9 million due primarily to interest on our term loan, which we did not have in the same period in 2023. See Note 14 to our consolidated financial statements for further information.

Gain on extinguishment of convertible senior notes decreased by $6.5 million, as we did not pay down any portion of our 2025 notes at a discount in the current period, where we had such activity in the same period in 2023. See Note 14 to our consolidated financial statements for further information on these transactions.

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Comparison of the Nine Months Ended September 30, 2024 and 2023

Revenue

Nine Months Ended September 30,Change
20242023DollarsPercentage
(in thousands, except percentages)
Real estate services
Brokerage$467,402 $454,888 $12,514 3 %
Partner26,483 30,799 (4,316)(14)
Total real estate services493,885 485,687 8,198 2 
Rentals152,105 135,636 16,469 12 
Mortgage109,619 107,838 1,781 2 
Other43,088 29,434 13,654 46 
Total revenue$798,697 $758,595 $40,102 5 
Percentage of revenue
Real estate services
Brokerage58.5 %60.0 %
Partner3.3 4.1 
Total real estate services61.8 64.1 
Rentals19.0 17.9 
Mortgage13.7 14.2 
Other5.5 3.8 
Total revenue100.0 %100.0 %

In the nine months ended September 30, 2024, revenue increased by $40.1 million, or 5%, as compared with the same period in 2023. This increase in revenue was primarily attributable to a $16.5 million increase in rentals revenue, a $13.7 million increase in other segment revenue, and an $8.2 million increase in real estate services revenue. Brokerage revenue increased by $12.5 million, and partner revenue decreased by $4.3 million. Brokerage revenue increased 3% during the period, driven by a 1% increase in brokerage transactions and a 2% increase in brokerage revenue per transaction.

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Cost of Revenue and Gross Margin
Nine Months Ended September 30,
Change
20242023
Dollars
Percentage
(in thousands, except percentages)
Cost of revenue
Real estate services$371,198 $359,625 $11,573 3 %
Rentals35,453 31,016 4,437 14 
Mortgage88,646 93,108 (4,462)(5)
Other21,139 18,178 2,961 16 
Total cost of revenue$516,436 $501,927 $14,509 3 
Gross profit
Real estate services$122,687 $126,062 $(3,375)(3)%
Rentals116,652 104,620 12,032 12 
Mortgage20,973 14,730 6,243 42 
Other21,949 11,256 10,693 95 
Total gross profit$282,261 $256,668 $25,593 10 
Gross margin (percentage of revenue)
Real estate services24.8 %26.0 %
Rentals76.7 77.1 
Mortgage19.1 13.7 
Other50.9 38.2 
Total gross margin35.3 33.8 

In the nine months ended September 30, 2024, total cost of revenue increased by $14.5 million, or 3%, as compared with the same period in 2023. This increase in cost of revenue was primarily attributable to a $9.6 million increase in personnel costs, transactions bonuses, and home-touring and field expenses, and a $4.4 million increase in home improvement costs incurred on behalf of home sellers.

In the nine months ended September 30, 2024, total gross margin increased 150 basis points as compared with the same period in 2023, driven primarily by increases in mortgage, and other gross margins, and the relative growth of our rentals business compared to our other businesses. This was partially offset by decreases in real estate services and rentals gross margins.

In the nine months ended September 30, 2024, real estate services gross margin decreased 120 basis points as compared with the same period in 2023. This was primarily attributable to a 280 basis point increase in personnel costs and transaction bonuses, partially offset by a 230 basis point decrease in home-touring and field expenses, each as a percentage of revenue, as we have eliminated compensation for home-touring and field expenses and replaced it with transaction bonuses for some employee agents. In addition, the increase was attributable to a 90 basis point increase in home improvement costs incurred on behalf of home sellers as a percentage of revenue. This was partially offset by a 70 basis point decrease in costs from our in-person company event, which we did not conduct in 2024.

In the nine months ended September 30, 2024, rentals gross margin decreased 40 basis points as compared with the same period in 2023.

In the nine months ended September 30, 2024, mortgage gross margin increased 540 basis points as compared with the same period in 2023. This was primarily attributable to a 230 basis point decrease in personnel costs and transaction bonuses and a 180 basis point decrease in production costs, each as a percentage of revenue.

In the nine months ended September 30, 2024, other gross margin increased 1,270 basis points as compared with the same period in 2023. This was primarily attributable to a 730 basis point decrease in personnel costs and transaction bonuses as a percentage of revenue, driven by revenue growth.
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Operating Expenses
Nine Months Ended September 30,
Change
20242023DollarsPercentage
(in thousands, except percentages)
Technology and development$128,976 $139,196 $(10,220)(7)%
Marketing92,324 97,531 (5,207)(5)
General and administrative181,366 186,584 (5,218)(3)
Restructuring4,732 7,159 (2,427)(34)
Total operating expenses$407,398 $430,470 $(23,072)(5)
Percentage of revenue
Technology and development16.1 %18.3 %
Marketing11.6 12.9 
General and administrative22.7 24.6 
Restructuring and reorganization0.6 0.9 
Total operating expenses51.0 %56.7 %

In the nine months ended September 30, 2024, technology and development expenses decreased by $10.2 million, or 7%, as compared with the same period in 2023. This was primarily attributable to a $9.3 million decrease in amortization expense, as the intangible technology assets acquired with Rent. completed their amortization.

In the nine months ended September 30, 2024, marketing expenses decreased by $5.2 million, or 5%, as compared with the same period in 2023. This was primarily attributable to a $4.0 million decrease in marketing media costs as we increased advertising.

In the nine months ended September 30, 2024, general and administrative expenses decreased by $5.2 million, or 3%, as compared with the same period in 2023. This was primarily attributable to a $5.3 million decrease in personnel costs, a $5.9 million decrease in costs from our annual, in-person company event, which we did not conduct in 2024, and a $3.8 million decrease in office and occupancy expenses. This was partially offset by an $9.6 million increase in legal settlements. See Note 7 to our consolidated financial statements for information on these legal matters.

In the nine months ended September 30, 2024, restructuring and reorganization expenses decreased by $2.4 million, or 34%, as compared with the same period in 2023.

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Interest Income, Interest Expense, Income Tax Expense, Gain on Extinguishment of Convertible Senior Notes, and Other Expense, Net
Nine Months Ended September 30,Change
20242023DollarsPercentage
(in thousands, except percentages)
Interest income$5,132 $8,170 $(3,038)(37)%
Interest expense(19,497)(5,291)(14,206)268 
Income tax expense(375)(882)507 (57)
Gain on extinguishment of convertible senior notes12,000 68,848 (56,848)(83)
Other expense, net(559)(537)(22)4 
Interest income, interest expense, income tax expense, gain on extinguishment of convertible notes, and other expense, net$(3,299)$70,308 $(73,607)(105)
Percentage of revenue
Interest income0.6 %1.1 %
Interest expense(2.4)(0.7)
Income tax expense0.0 (0.1)
Gain on extinguishment of convertible senior notes1.5 9.1 
Other expense, net(0.1)(0.1)
Interest income, interest expense, income tax expense, gain on extinguishment of convertible notes, and other expense, net(0.4)%9.3 %

In the nine months ended September 30, 2024, interest income, interest expense, income tax expense, gain on extinguishment of convertible senior notes, and other expense, net decreased by $73.6 million as compared to the same period in 2023.

Interest expense increased by $14.2 million due primarily to interest on our term loan, which we did not have in the same period in 2023. See Note 14 to our consolidated financial statements for further information.

Gain on extinguishment of convertible senior notes decreased by $56.8 million, due to our paying down a smaller portion of our 2025 notes at a discount as compared to the same period in 2023. See Note 14 to our consolidated financial statements for further information on these transactions.

Segment Financial Information

The following tables present, for each of our reportable and other segments, financial information on a GAAP basis and adjusted EBITDA, which is a non-GAAP financial measure, for the three and nine months ended September 30, 2024 and 2023.

See Note 3 to our consolidated financial statements for more information regarding our GAAP segment reporting.

To supplement our consolidated financial statements that are prepared and presented in accordance with GAAP, we also compute and present adjusted EBITDA, which is a non-GAAP financial measure. We believe adjusted EBITDA is useful for investors because it enhances period-to-period comparability of our financial statements on a consistent basis and provides investors with useful insight into the underlying trends of the business. The presentation of this financial measure is not intended to be considered in isolation or as a substitute of, or superior to, our financial information prepared and presented in accordance with GAAP. Our calculation of adjusted EBITDA may be different from adjusted EBITDA or similar non-GAAP financial measures used by other companies, limiting its usefulness for comparison purposes. Our adjusted EBITDA for the three and nine months ended September 30, 2024 and 2023 is presented below, along with a reconciliation of adjusted EBITDA to net (loss) income from continuing operations.
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Three Months Ended September 30, 2024
Real estate servicesRentalsMortgageOtherCorporate overheadTotal
(in thousands)
Revenue
$175,136 $51,660 $35,621 $15,598 $— $278,015 
Cost of revenue126,421 12,366 30,214 7,151 — 176,152 
Gross profit48,715 39,294 5,407 8,447 — 101,863 
Operating expenses
Technology and development26,927 10,648 675 889 1,193 40,332 
Marketing12,907 13,600 667 12 — 27,186 
General and administrative18,263 24,074 5,885 1,215 9,351 58,788 
Restructuring and reorganization— — — — 2,509 2,509 
Total operating expenses58,097 48,322 7,227 2,116 13,053 128,815 
(Loss) income from continuing operations(9,382)(9,028)(1,820)6,331 (13,053)(26,952)
Interest income, interest expense, income tax expense, gain on extinguishment of convertible senior notes, and other expense, net38 100 (2,966)266 (4,268)(6,830)
Net (loss) income from continuing operations$(9,344)$(8,928)$(4,786)$6,597 $(17,321)$(33,782)

Three Months Ended September 30, 2024
Real estate servicesRentalsMortgageOtherCorporate overheadTotal
(in thousands)
Net (loss) income from continuing operations$(9,344)$(8,928)$(4,786)$6,597 $(17,321)$(33,782)
Interest income(1)
(10)(111)(3,392)(266)(1,451)(5,230)
Interest expense(2)
— — 6,208 — 5,565 11,773 
Income tax expense— 11 — — (23)(12)
Depreciation and amortization3,002 5,077 895 227 283 9,484 
Stock-based compensation(3)
11,333 3,515 (89)588 2,955 18,302 
Restructuring and reorganization(4)
— — — — 2,509 2,509 
Legal contingencies(5)
— — — — 904 904 
Adjusted EBITDA$4,981 $(436)$(1,164)$7,146 $(6,579)$3,948 
(1) Interest income includes $3.4 million of interest income related to originated mortgage loans for the three months ended September 30, 2024.
(2) Interest expense includes $3.2 million of interest expense related to our warehouse credit facilities for the three months ended September 30, 2024.
(3) Stock-based compensation consists of expenses related to restricted stock units and our employee stock purchase program. See Note 11 to our consolidated financial statements for more information.
(4) Restructuring and reorganization expenses primarily consist of personnel-related costs associated with employee terminations, furloughs, or retention due to the restructuring and reorganization activities.
(5) Legal contingencies includes expenses related to significant contingent liabilities resulting from litigation or other legal proceedings.

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Three Months Ended September 30, 2023
Real estate servicesRentalsMortgageOtherCorporate overheadTotal
(in thousands)
Revenue
$177,750 $47,410 $32,923 $10,873 $— $268,956 
Cost of revenue123,684 10,824 29,629 6,479 — 170,616 
Gross profit54,066 36,586 3,294 4,394 — 98,340 
Operating expenses
Technology and development25,711 15,813 800 1,133 935 44,392 
Marketing10,785 12,245 1,088 20 (43)24,095 
General and administrative18,418 21,838 6,670 952 7,502 55,380 
Total operating expenses54,914 49,896 8,558 2,105 8,394 123,867 
(Loss) income from continuing operations
(848)(13,310)(5,264)2,289 (8,394)(25,527)
Interest income, interest expense, income tax expense, gain on extinguishment of convertible senior notes, and other expense, net
41 42 (73)207 6,338 6,555 
Net (loss) income from continuing operations
$(807)$(13,268)$(5,337)$2,496 $(2,056)$(18,972)
Three Months Ended September 30, 2023
Real estate servicesRentalsMortgageOtherCorporate overheadTotal
(in thousands)
Net (loss) income from continuing operations$(807)$(13,268)$(5,337)$2,496 $(2,056)$(18,972)
Interest income(1)
(41)(81)(2,886)(207)(1,732)(4,947)
Interest expense(2)
— — 3,132 — 1,598 4,730 
Income tax expense— 37 70 — 132 239 
Depreciation and amortization3,123 9,681 947 233 312 14,296 
Stock-based compensation(3)
11,151 4,255 473 574 2,347 18,800 
Gain on extinguishment of convertible senior notes— — — — (6,495)(6,495)
Adjusted EBITDA$13,426 $624 $(3,601)$3,096 $(5,894)$7,651 
(1) Interest income includes $2.9 million of interest income related to originated mortgage loans for the three months ended September 30, 2023.
(2) Interest expense includes $3.1 million of interest expense related to our warehouse credit facilities for the three months ended September 30, 2023.
(3) Stock-based compensation consists of expenses related to restricted stock units and our employee stock purchase program. See Note 11 to our consolidated financial statements for more information.


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Nine Months Ended September 30, 2024
Real estate servicesRentalsMortgageOtherCorporate overheadTotal
(in thousands)
Revenue
$493,885 $152,105 $109,619 $43,088 $— $798,697 
Cost of revenue371,198 35,453 88,646 21,139 — 516,436 
Gross profit122,687 116,652 20,973 21,949 — 282,261 
Operating expenses
Technology and development84,354 36,577 2,031 2,686 3,328 128,976 
Marketing47,939 42,137 2,221 27 — 92,324 
General and administrative57,178 66,794 19,087 3,279 35,028 181,366 
Restructuring and reorganization— — — — 4,732 4,732 
Total operating expenses189,471 145,508 23,339 5,992 43,088 407,398 
(Loss) income from continuing operations(66,784)(28,856)(2,366)15,957 (43,088)(125,137)
Interest income, interest expense, income tax expense, gain on extinguishment of convertible senior notes, and other expense, net6 65 (2,962)690 (1,098)(3,299)
Net (loss) income from continuing operations$(66,778)$(28,791)$(5,328)$16,647 $(44,186)$(128,436)

Nine Months Ended September 30, 2024
Real estate servicesRentalsMortgageOtherCorporate overheadTotal
(in thousands)
Net (loss) income from continuing operations$(66,778)$(28,791)$(5,328)$16,647 $(44,186)$(128,436)
Interest income(1)
(40)(233)(8,416)(690)(4,169)(13,548)
Interest expense(2)
— — 11,246 — 16,522 27,768 
Income tax expense— 109 — — 266 375 
Depreciation and amortization9,302 19,888 2,779 667 704 33,340 
Stock-based compensation(3)
34,246 9,978 663 1,688 7,367 53,942 
Restructuring and reorganization(4)
— — — — 4,732 4,732 
Gain on extinguishment of convertible senior notes— — — — (12,000)(12,000)
Legal contingencies(5)
— — — — 10,154 10,154 
Adjusted EBITDA$(23,270)$951 $944 $18,312 $(20,610)$(23,673)
(1) Interest income includes $8.4 million of interest income related to originated mortgage loans for the nine months ended September 30, 2024.
(2) Interest expense includes $8.3 million of interest expense related to our warehouse credit facilities for the nine months ended September 30, 2024.
(3) Stock-based compensation consists of expenses related to restricted stock units and our employee stock purchase program. See Note 11 to our consolidated financial statements for more information.
(4) Restructuring and reorganization expenses primarily consist of personnel-related costs associated with employee terminations, furloughs, or retention due to the restructuring and reorganization activities.
(5) Legal contingencies includes expenses related to significant contingent liabilities resulting from litigation or other legal proceedings.

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Nine Months Ended September 30, 2023
Real estate servicesRentalsMortgageOtherCorporate overheadTotal
(in thousands)
Revenue(1)
$485,687 $135,636 $107,838 $29,434 $— $758,595 
Cost of revenue359,625 31,016 93,108 18,178 — 501,927 
Gross profit126,062 104,620 14,730 11,256 — 256,668 
Operating expenses
Technology and development82,650 48,081 2,177 3,475 2,813 139,196 
Marketing51,849 42,509 3,122 46 5 97,531 
General and administrative58,997 73,445 20,323 3,049 30,770 186,584 
Restructuring and reorganization— — — — 7,159 7,159 
Total operating expenses193,496 164,035 25,622 6,570 40,747 430,470 
(Loss) income from continuing operations
(67,434)(59,415)(10,892)4,686 (40,747)(173,802)
Interest income, interest expense, income tax expense, gain on extinguishment of convertible senior notes, and other expense, net
41 115 (224)475 69,901 70,308 
Net (loss) income from continuing operations
$(67,393)$(59,300)$(11,116)$5,161 $29,154 $(103,494)
(1) Included in revenue is $1.2 million from providing services to our discontinued properties segment.
Nine Months Ended September 30, 2023
Real estate servicesRentalsMortgageOtherCorporate overheadTotal
(in thousands)
Net (loss) income from continuing operations
$(67,393)$(59,300)$(11,116)$5,161 $29,154 $(103,494)
Interest income(1)
(41)(238)(9,062)(475)(7,400)(17,216)
Interest expense(2)
— — 9,737 — 5,285 15,022 
Income tax expense— 123 222 — 537 882 
Depreciation and amortization12,819 30,068 2,929 756 1,745 48,317 
Stock-based compensation(3)
33,041 11,580 2,554 1,696 6,277 55,148 
Acquisition-related costs(4)
— — — — 8 8 
Restructuring and reorganization(5)
— — — — 7,159 7,159 
Impairment(6)
— — — — 113 113 
Gain on extinguishment of convertible senior notes— — — — (68,848)(68,848)
Adjusted EBITDA$(21,574)$(17,767)$(4,736)$7,138 $(25,970)$(62,909)
(1) Interest income includes $9.0 million of interest income related to originated mortgage loans for the nine months ended September 30, 2023.
(2) Interest expense includes $9.7 million of interest expense related to our warehouse credit facilities for the nine months ended September 30, 2023.
(3) Stock-based compensation consists of expenses related to restricted stock units and our employee stock purchase program. See Note 11 to our consolidated financial statements for more information.
(4) Acquisition-related costs consist of fees for external advisory, legal, and other professional services incurred in connection with our acquisition of other companies.
(5) Restructuring and reorganization expenses primarily consist of personnel-related costs associated with employee terminations, furloughs, or retention due to the restructuring and reorganization activities.
(6) Impairment consists of an impairment loss due to subleasing one of our operating leases.
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Liquidity and Capital Resources

As of September 30, 2024, we had cash and cash equivalents of $165.7 million.

As of September 30, 2024, we had $576.9 million of convertible senior notes outstanding across two issuances, maturing between October 15, 2025 and April 1, 2027. See Note 14 to our consolidated financial statements for our obligations to pay semi-annual interest and to repay any outstanding amounts at the notes’ maturity. During the three months ended September 30, 2024, we did not repurchase any of our 2025 convertible senior notes. As of September 30, 2024, we have repurchased a total of $582.5 million of our 2025 convertible senior notes, using $432.4 million in cash. As of September 30, 2024, we have $17.6 million remaining under the repurchase program for future repurchases.

In addition, as of September 30, 2024 we had $248.1 million principal amount of our term loan, maturing on October 20, 2028.

As of September 30, 2024, we had 40,000 shares of convertible preferred stock outstanding. We are required to settle these shares in the fourth quarter of 2024 by either paying $40,000, which is the mandatory redemption amount, or through a conversion into shares of our common stock. While not at our discretion, we anticipate settling in cash. See Note 10 to our consolidated financial statements for more information regarding our convertible preferred stock.

Our mortgage business has significant cash requirements due to the period of time between its origination of a mortgage loan and the sale of that loan. We have relied on warehouse credit facilities with different lenders to fund substantially the entire portion of the mortgage loans that our mortgage business originates. Once our mortgage business sells a loan in the secondary mortgage market, we use the proceeds to reduce the outstanding balance under the related facility. See Note 14 to our consolidated financial statements for more information regarding our warehouse credit facilities.

We believe that our existing cash and cash equivalents and investments, together with cash we expect to generate from future operations, and borrowings from our mortgage warehouse credit facilities, will provide sufficient liquidity to meet our operational needs and our growth, and fulfill our payment obligations. However, our liquidity assumptions may change or prove to be incorrect, and we could exhaust our available financial resources sooner than we currently expect. As a result, we may seek new sources of credit financing or elect to raise additional funds through equity, equity-linked, or debt financing arrangements. We cannot assure you that any additional financing will be available to us on acceptable terms or at all.

Our title and settlement business holds cash in escrow that we do not record on our consolidated balance sheets. See Note 7 to our consolidated financial statements for more information regarding these amounts.

Cash Flows

The following table summarizes our cash flows for the periods presented:
Nine Months Ended September 30,
20242023
(in thousands)
Net cash (used in) provided by operating activities$(96,046)$91,428 
Net cash provided by investing activities36,636 97,963 
Net cash provided by (used in) financing activities74,242 (304,347)

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Net Cash (Used In) Provided By Operating Activities

Our operating cash flows result primarily from cash generated by commissions paid to us from our real estate services business, sales of homes from our properties business, and subscription-based product offerings from our rentals business. Our primary uses of cash from operating activities include payments for personnel-related costs, including employee benefits and bonus programs, marketing and advertising activities, purchases of homes for our properties business, office and occupancy costs, and outside services costs. Additionally, our mortgage business generates a significant amount operating cash flow activity from the origination and sale of loans held for sale.

Net cash used in operating activities was $96.0 million for the nine months ended September 30, 2024, primarily attributable to our net loss of $128.4 million. This decrease was partially offset by a net increase of $84.6 million from non-cash items related to stock-based compensation, depreciation and amortization, amortization of debt discounts and issuances costs, lease expense related to right-of-use assets, changes in the fair value of and sale of mortgage servicing rights, gain on extinguishment of our convertible senior notes, and other non-cash items. The primary use of cash related to changes in our assets and liabilities was $52.7 million in net originations of loans held for sale.

Net cash provided by operating activities was $91.4 million for the nine months ended September 30, 2023, primarily attributable to changes in assets and liabilities, which increased cash provided by operating activities by $150.4 million. This increase was partially offset by our net loss of $107.1 million. In addition, there was a net increase of $48.2 million from non-cash items related to stock-based compensation, depreciation and amortization, amortization of debt discounts and issuances costs, lease expense related to right-of-use assets, changes in the fair value of mortgage servicing rights, gain on extinguishment of our convertible senior notes, and other non-cash items. The primary source of cash related to changes in our assets and liabilities was a $114.2 million decrease in inventory related to our properties business.

Net Cash Provided by Investing Activities

Our primary investing activities include the purchase, sale, and maturity of investments and purchases of property and equipment, primarily related to capitalized software development expenses and computer equipment and software.

Net cash provided by investing activities was $36.6 million for the nine months ended September 30, 2024, primarily attributable to $45.6 million in net sales and maturities of our investments in U.S. government securities, partially offset by $9.0 million in purchases of property and equipment.

Net cash provided by investing activities was $98.0 million for the nine months ended September 30, 2023, primarily attributable to $107.2 million in net maturities in U.S. government securities, partially offset by $9.2 million in purchases of property and equipment.

Net Cash Provided By (Used In) Financing Activities

Our primary financing activities have come from (i) our initial public offering in August 2017, (ii) sales of our common stock and 2023 notes in July 2018, our common stock and convertible preferred stock in April 2020, our 2025 notes in October 2020, and our 2027 notes in March 2021, (iii) our term loan entered into in October 2023, and (iv) the sale of our common stock pursuant to stock option exercises and our ESPP. Additionally, we generate a significant amount of financing cash flow activity due to borrowings from and repayments to our warehouse credit facilities and, historically, our secured revolving credit facility, which we terminated on December 29, 2022.

Net cash provided by financing activities was $74.2 million for the nine months ended September 30, 2024, attributable to $125.0 million in proceeds from the additional draw on our term loan and a $56.9 million increase in net borrowings under our warehouse credit facilities. This was partially offset by $107.0 million used in connection with repurchases of our 2025 notes.

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Net cash used in financing activities was $304.3 million for the nine months ended September 30, 2023, attributable to $212.4 million used in connection with repurchases of our 2025 notes and $23.5 million used in connection with the repayment of our 2023 notes. This was partially offset by a $58.2 million decrease in net borrowings under our warehouse credit facilities.

Critical Accounting Policies and Estimates

Discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and related disclosure of contingent assets and liabilities, revenue, and expenses at the date of the financial statements. Generally, we base our estimates on historical experience and on various other assumptions in accordance with GAAP that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

Critical accounting policies and estimates are those that we consider the most important to the portrayal of our financial condition and results of operations because they require our most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Based on this definition, we have identified the critical accounting policies and estimates addressed below. In addition, we have other key accounting policies and estimates that are described in Note 1 to our consolidated financial statements.

Revenue Recognition

Our key revenue components are brokerage revenue, partner revenue, rentals revenue, mortgage revenue, and other revenue. Of these, we consider the most critical of our revenue recognition policies to be those related to commissions and fees charged on brokerage transactions closed by our lead agents, and from the sale of homes. We recognize commission-based brokerage revenue upon closing of a brokerage transaction, less the amount of any commission refunds, closing-cost reductions, or promotional offers that may result in a material right. We determined that brokerage revenue primarily contains a single performance obligation that is satisfied upon the closing of a transaction, at which point the entire transaction price is earned. We evaluate our brokerage contracts and promotional pricing to determine if there are any additional material rights and allocate the transaction price based on standalone selling prices.

Rentals revenue is primarily recognized on a straight-line basis over the term of the contract, which is generally less than one year. Revenue is presented net of sales allowances, which are not material.

Mortgage revenue is recognized (1) when an interest rate lock commitment is made to a customer, adjusted for a pull-through percentage, (2) for origination fees, when the purchase or refinance of a loan is complete, and (3) when the fair value of our interest rate lock commitments, forward sale commitments, and loans held for sale are recorded at current market quotes.

We have utilized the practical expedient in ASC 606, Revenue from Contracts with Customers, and elected not to capitalize contract costs for contracts with customers with durations less than one year. We do not have significant remaining performance obligations or contract balances.

Acquired Intangible Assets and Goodwill

We recognize separately identifiable intangible assets acquired in a business combination. Determining the fair value of the intangible assets acquired requires management’s judgment, often utilizes third-party valuation specialists, and involves the use of significant estimates and assumptions with respect to the timing and amounts of future cash flows, discount rates, replacement costs, and asset lives, among other estimates.

The judgments made in the determination of the estimated fair value assigned to the intangible assets acquired and the estimated useful life of each asset could significantly impact our consolidated financial statements in periods after the acquisition, such as through depreciation and amortization expense, as well as impairment charges, if applicable.

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We evaluate intangible assets for impairment whenever events or circumstances indicate that they may not be recoverable. We measure recoverability by comparing the carrying amount of an asset group to future undiscounted net cash flows expected to be generated with such asset group.

Goodwill represents the excess of the purchase price over the fair value of the net tangible assets and identifiable intangible assets acquired in a business combination. Goodwill is not amortized, but is subject to impairment testing. We assess the impairment of goodwill on an annual basis, during the fourth quarter, or whenever events or changes in circumstances indicate that goodwill may be impaired. Based on our annual goodwill impairment test performed in the fourth quarter of 2023, the estimated fair values of all reporting units substantially exceeded their carrying values. No goodwill impairment charges were recorded in the third quarter of 2024 or 2023.

We assess goodwill for possible impairment by performing a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If we qualitatively determine that it is not more likely than not that the fair value is less than its carrying amount, then no additional impairment steps are necessary. When utilizing a quantitative assessment, we determine fair value at the reporting unit level based on a combination of an income approach and market approach. The income approach is based on estimated future cash flows, discounted at a rate that approximates the cost of capital of a similar market participant, while the market approach is based on guideline public company multiples and adjusted for the specific size and risk profile of each reporting units.

Debt Issuances

On October 20, 2023, we entered into a definitive agreement with Apollo Capital Management, L.P. and its affiliates (“Apollo”) whereby Apollo agreed to commit up to $250.0 million of financing for us in the form of a first lien term loan facility. We borrowed the first half of the facility on October 20, 2023, and the remaining $125.0 million was available as a delayed draw term loan. On May 31, 2024, we drew down the remaining $125.0 million of the facility. As part of the transaction, we repurchased a $5.0 million principal amount of our 2025 convertible notes held by Apollo and $71.9 million principal amount of 2027 convertible notes held by Apollo for an aggregate repurchase price of $57.1 million using cash on our balance sheet. See Note 14 to our consolidated financial statements for a further description of this transaction.

We considered the nature of this debt issuance, the associated fees, and the associated gains or losses on the repurchases of convertible notes as part of our recording of this transaction.

Recent Accounting Standards

For information on recent accounting standards, see Note 1 to our consolidated financial statements.

Item 3. Qualitative and Quantitative Disclosures About Market Risk.

Our primary operations are within the United States and Canada. We are exposed to market risks in the ordinary course of our business. These risks primarily consist of fluctuations in interest rates.

Interest Rate Risk

Our investment policy allows us to maintain a portfolio of cash equivalents and investments in a variety of securities, including U.S. treasury and agency issues, bank certificates of deposit that are 100% insured by the Federal Deposit Insurance Corporation, and SEC-registered money market funds that consist of a minimum of $1 billion in assets and meet the above requirements. The goals of our investment policy are liquidity and capital preservation. We do not enter into investments for trading or speculative purposes.

As of September 30, 2024, we had cash and cash equivalents of $165.7 million. Declines in interest rates would reduce future investment income. Assuming no change in our outstanding cash and cash equivalents during the fourth quarter of 2024, a hypothetical 10% change in interest rates, occurring during and sustained throughout that quarter, would not have a material impact on our financial results for that quarter.

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We are exposed to interest rate risk on our mortgage loans held for sale and IRLCs associated with our mortgage loan origination services. We manage this interest rate risk through the use of forward sales commitments on both a best effort whole loans basis and on a mandatory basis. Forward sales commitments entered into on a mandatory basis are done through the use of commitments to sell mortgage-backed securities. We do not enter into or hold derivatives for trading or speculative purposes. The fair value of our IRLCs and forward sales commitments are reflected in other current assets and accrued liabilities, as applicable, with changes in the fair value of these commitments recognized as revenue. The net fair value change for the periods presented were not material. See Note 4 to our consolidated financial statements for a summary of the fair value of our forward sales commitments and our IRLCs as of September 30, 2024.

Foreign Currency Exchange Risk

As our operations in Canada have been limited, and we do not maintain a significant balance of foreign currency, we do not currently face significant foreign currency exchange rate risk.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive and principal financial officers, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934), as of the end of the period covered by this quarterly report. Based on such evaluation, our principal executive and principal financial officers have concluded that as of such date, our disclosure controls and procedures were effective at the reasonable assurance level described below.

Changes in Internal Control

In connection with the evaluation required by Rule 13a-15(d) under the Securities Exchange Act of 1934, there were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2024 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
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PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

See "Legal Proceedings" under Note 7 to our consolidated financial statements for a discussion of our material, pending legal proceedings.

Item 1A. Risk Factors.

There have not been any material changes from the risk factors included in Item 1A of our annual report for the year ended December 31, 2023, as supplemented by Part II, Item 1A of our quarterly report on Form 10-Q for the quarter ended March 31, 2024. You should carefully consider the risks described in our annual report for the year ended December 31, 2023 and our quarterly report for the quarter ended March 31, 2024, together with all other information in this quarterly report, before investing in any of our securities. The occurrence of any single risk or any combination of risks could materially and adversely affect our business, operating results, financial condition, liquidity, or competitive position, and consequently, the value of our securities. The material adverse effects include, but are not limited to, not growing our revenue or market share at the pace that they have grown historically or at all, our revenue and market share fluctuating on a quarterly and annual basis, an extension of our history of losses and a failure to become profitable, not achieving the revenue and net income (loss) guidance that we provide, and harm to our reputation and brand.

Item 5. Other Information.

Rule 10b5-1 Trading Plans

During the quarter ended September 30, 2024, the following directors and Section 16 officers adopted contracts, instructions, or written plans for the purchase or sale of our securities. Each of these intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Securities Exchange Act of 1934 (“10b5-1 Plan”). None of our other directors or Section 16 officers adopted or terminated a “non-Rule 10b5-1 trading arrangement” as defined in Item 408 of Regulation S-K during the covered period.

The 10b5-1 Plan included a representation from each officer to the broker administering the plan that they were not in possession of any material nonpublic information regarding the company or the securities subject to the plan. A similar representation was made to the company in connection with the adoption of the 10b5-1 Plan under the company’s insider trading policy. Those representations were made as of the date of adoption of each 10b5-1 Plan.
NameTitleActionDate AdoptedExpiration DateAggregate # of Securities to be Bought/Sold
Christian Taubman(1)
Chief Growth Officer
Adoption
August 8, 2024
June 30, 2025
44,437
(1) Christian Taubman, our Chief Growth Officer, entered into a Rule 10b5-1 Plan on August 8, 2024. Mr. Taubman’s 10b5-1 Plan provides for the potential sale of 44,437 shares of our common stock.
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Item 6. Exhibits.

The exhibits required to be filed or furnished as part of this Quarterly Report are listed below. Notwithstanding any language to the contrary, exhibits 32.1, 32.2, 101, and 104 shall not be deemed to be filed as part of this Quarterly Report for purposes of Section 18 of the Securities Exchange Act of 1934.

Incorporated by Reference
Exhibit Number
Exhibit DescriptionFormExhibitFiling DateFiled or Furnished Herewith
31.1X
31.2X
32.1X
32.2X
101Interactive data filesX
104Cover page interactive data file, submitted using inline XBRL (contained in Exhibit 101)X
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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Redfin Corporation
(Registrant)
November 7, 2024/s/ Glenn Kelman
(Date)
Glenn Kelman
President and Chief Executive Officer
(Duly Authorized Officer)
November 7, 2024/s/ Chris Nielsen
(Date)
Chris Nielsen
Chief Financial Officer
(Principal Financial Officer)