While these conditions are quite favorable for sellers in terms of pricing, it is not so positive for real estate brokerages like RDFN due to the lower volume of transactions. At the same time, RDFN has no plans on taking its foot off the pedal in terms of advertising and in terms of adding new agents to its team. Consequently, RDFN expects to continue bleeding red ink as it seeks to build on its market share, improve its service, and increase its closing success rates.
Taking a closer look at its Q4 results, RDFN posted a loss per share of ($0.02), beating analysts' expectations by $0.03. Also, net loss did improve significantly on a year/year basis coming in at ($1.8) million versus ($5.3) million in the year ago period. This was despite the fact that gross margin dipped to 30% from 32%.
On the topline revenue was up 43% to $95.8 million, also exceeding the $91.6 million Capital IQ consensus, and also climbing from the 35% revenue growth achieved in both Q3 and Q2. This was driven by continued market share gains which reached 0.71% of U.S. existing home sales. That represents a 0.15% increase from 4Q16.
During its earnings conference call last night, management also highlighted its newer Redfin Now segment in which the company directly purchases homes from buyers, renovates them, and then re-sells them. Although still only a fractional component of the total business, RDFN is increasingly bullish on its prospects. This is evidenced by the fact that it plans to increase its home purchases to $20 million in Q1 from the prior $10 million level.
Another potential catalyst for RDFN is that it is investing and developing new software that will allow customers and agents to write up offers in minutes. When combined with another one of its up-and-coming segments, Redfin Mortgage, the company will eventually be able to streamline the whole closing process digitally. Along with its much lower commissions and market leading site, RDFN will have some potent competitive advantages in its arsenal.
On the downside, RDFN did issue weaker-than-expected 1Q18 guidance, forecasting revenue of $74.6-$78.4 million versus the $80.1 million consensus. Furthermore, net losses are expected to widen to ($38.7)-($35.9) million compared to the ($0.28.1) million loss in 1Q17. Hurting its outlook is the aforementioned tight housing supply. Inventory levels remain low, driving home prices higher. In turn, this is keeping some buyers on the sidelines, diminishing closing success rates for its agents. To combat this, RDFN is planning on adding more agents to its team, which will allow each agent to focus their attention more on individual customers.
And lastly, RDFN also intends to ramp up its advertising despite the slower market. Management feels that there is still plenty of room for growth in terms of name recognition, particularly on the brokerage side of the business. In the long run, this could help drive faster market share gains, but, it will come at the expense of profitability in the near term -- evidenced by the steeper expected losses.