Debt

9 Months Ended

Sep. 30, 2022

Debt Disclosure [Abstract]

Debt

DebtWarehouse 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 in our consolidated balance sheets. Borrowings under each warehouse credit facility are secured by the related mortgage loan and rights and income associated with the loan. The following table summarizes borrowings under these facilities as of the periods presented:

	September 30, 2022
Lender	Borrowing Capacity		Outstanding Borrowings		Weighted-Average Interest Rate on Outstanding Borrowings		Maturity Date
City National Bank	$	100,000	$	36,010	4.43	%	11/24/2022
Comerica Bank	75,000		29,599		5.14		Upon lender demand
Origin Bank	75,000		33,572		4.82		9/29/2023
M&T Bank	50,000		21,068		4.91		10/13/2023
Prosperity Bank	150,000		59,578		4.93		10/30/2023
Republic Bank & Trust Company	75,000		29,171		4.38		8/16/2023
Wells Fargo Bank, N.A.	100,000		43,531		5.12		As determined by lender
Total	$	625,000	$	252,529

	December 31, 2021
Lender	Borrowing Capacity		Outstanding Borrowings		Weighted-Average Interest Rate on Outstanding Borrowings
Western Alliance Bank	$	50,000	$	17,089	3.00	%
Texas Capital Bank, N.A.	40,000		11,852		3.01
Flagstar Bank, FSB	25,000		4,102		3.00
Total	$	115,000	$	33,043

Secured Revolving Credit Facility—To provide capital for the homes that it purchases, RedfinNow has, through a special purpose entity called RedfinNow Borrower, entered into a secured revolving credit facility with Goldman Sachs Bank, N.A. ("Goldman Sachs"). Borrowings under the facility are secured by RedfinNow Borrower's assets, including the financed homes, as well as the equity interests in RedfinNow Borrower. Under the facility, RedfinNow Borrower and certain other Redfin entities have ongoing obligations, including Redfin Corporation’s compliance with financial covenants based on its net worth, liquidity, and leverage ratio, each measured on a quarterly basis. The following table summarizes borrowings under this facility as of the periods presented:

	September 30, 2022						December 31, 2021
Lender	Borrowing Capacity		Outstanding Borrowings		Weighted-Average Interest Rate on Outstanding Borrowings		Borrowing Capacity		Outstanding Borrowings		Weighted-Average Interest Rate on Outstanding Borrowings
Goldman Sachs Bank USA	$	400,000	$	202,416	6.10	%	$	200,000	$	199,781	3.30	%

The facility matures on August 9, 2023, but we may extend the maturity date for an additional six months to repay outstanding borrowings. Goldman Sachs may, at its sole option, finance a portion of RedfinNow Borrower's acquisition costs of qualified homes that have been purchased. The portion financed is based, in part, on how long the qualifying home has been owned by a Redfin entity. Beginning on January 1, 2022, all outstanding borrowings generally bear interest at a rate equal to (i) the USD-SOFR-Compound rate plus (ii) 11.448 basis points (subject to a floor of 0.30%) plus (iii) 3.00%. Outstanding borrowings before January 1, 2022 generally bore interest at a rate of one-month LIBOR (subject to a floor of 0.30%) plus 3.00%.

RedfinNow Borrower must repay all borrowings and accrued interest upon the termination of the facility, and it has the option to repay the borrowings, and the related interest, with respect to a specific financed home upon the sale of such home. In certain situations involving a financed home remaining unsold after a certain time period or becoming ineligible for financing under the facility, RedfinNow Borrower may be obligated to repay all or a portion of the borrowings, and related interest, with respect to such home prior to the sale of such home. In instances involving "bad acts," Redfin Corporation has guaranteed repayment of amounts owed under the facility, in some situations, and indemnification of certain expenses incurred, in other situations.

As of September 30, 2022, RedfinNow Borrower had $419,269 of total assets, of which $297,469 related to inventory and $72,914 in cash and cash equivalents. As of December 31, 2021, RedfinNow Borrower had $567,128 of total assets, of which $337,630 related to inventory and $101,064 in cash and equivalents.

For the three months ended September 30, 2022 and 2021, we amortized $95 and $81 of debt issuance costs, respectively, and recognized $2,980 and $1,375 of interest expense, respectively. For the nine months ended September 30, 2022 and 2021, we amortized $280 and $217 of debt issuance costs, respectively, and recognized $5,731 and $2,328 of interest expense, respectively.

Convertible Senior Notes—We have issued convertible senior notes with the following characteristics:

Issuance	Maturity Date	Stated Cash Interest Rate		Effective Interest Rate		First Interest Payment Date	Semi-Annual Interest Payment Dates	Conversion Rate
2023 notes	July 15, 2023	1.75	%	2.45	%	January 15, 2019	January 15; July 15	32.7332
2025 notes	October 15, 2025	—		0.42		—	—	13.7920
2027 notes	April 1, 2027	0.50		0.90		October 1, 2021	April 1; October 1	10.6920

We issued our 2023 notes on July 23, 2018, with an aggregate principal amount of $143,750. Subsequent to the issuance date, we repurchased or settled conversions of an aggregate of $120,238 of our 2023 notes. On July 20, 2021, our 2023 notes became redeemable by us, but we did not exercise our redemption right during the three months ended September 30, 2022.

We issued our 2025 notes on October 20, 2020, with an aggregate principal amount of $661,250.

We issued our 2027 notes on March 25, 2021 and April 5, 2021, with an aggregate principal amount of $575,000.

The components of our convertible senior notes were as follows:

	September 30, 2022
Issuance	Aggregate Principal Amount		Unamortized Debt Discount		Unamortized Debt Issuance Costs		Net Carrying Amount
2023 notes	$	23,512	$	—	$	119	$	23,393
2025 notes	661,250		—		8,396		652,854
2027 notes	575,000		—		10,086		564,914

	December 31, 2021
Issuance	Aggregate Principal Amount		Unamortized Debt Discount		Unamortized Debt Issuance Costs		Net Carrying Amount
2023 notes	$	23,512	$	—	$	232	$	23,280
2025 notes	661,250		—		10,467		650,783
2027 notes	575,000		—		11,766		563,234

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
2023 notes
Contractual interest expense	$	103	$	103	$	309	$	311
Amortization of debt discount	—		—		—		—
Amortization of debt issuance costs	38		41		113		151
Total interest expense	$	141	$	144	$	422	$	462
2025 notes
Contractual interest expense	—		—		—		—
Amortization of debt discount	—		—		—		—
Amortization of debt issuance costs	690		690		2,070		2,070
Total interest expense	$	690	$	690	$	2,070	$	2,070
2027 notes
Contractual interest expense	719		719		2,156		1,468
Amortization of debt discount	—		—		—		—
Amortization of debt issuance costs	560		560		1,680		1,145
Total interest expense	$	1,279	$	1,279	$	3,836	$	2,613
Total
Contractual interest expense	822		822		2,465		1,779
Amortization of debt discount	—		—		—		—
Amortization of debt issuance costs	1,288		1,291		3,863		3,366
Total interest expense	$	2,110	$	2,113	$	6,328	$	5,145

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 April 15, 2023 for our 2023 notes, 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;

•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.

Classification of Our Convertible Senior Notes

Historically, we had separated our 2023 notes and our 2025 notes into liability and equity components. With our adoption of ASU 2020-06 on January 1, 2021, using the modified retrospective approach, this accounting treatment is no longer applicable. All of our convertible senior notes are now accounted for wholly 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.

2027 Capped Calls—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’ 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.