HomeSmart
Scottsdale, Arizona, United States
Industry: Real Estate
Region: US 🇺🇸
Founded: 2010
Expected Valuation: $1 billion USD
IPO Date: 2023 (expected)
HomeSmart Holdings, Inc.
Key Company Facts
| Founded | 2000 |
| Headquarters | Scottsdale, US |
| Sector | Software |
| Industry | Real Estate/Information Tech |
| Founders | Matt Widdows |
| Number of employees | 268 |
| IPO Date | 2023 (expected) |
| Number of investors | N/A |
| Total funding | $100 million USD |
| Valuation estimate | $1 billion USD |
Company Overview & History
HomeSmart is a revolutionary real estate enterprise powered by a proprietary end-to-end technology platform.
Over the past 20 years, the company has developed a cost-effective, agent-centric real estate business model, built on their cloud-based platform, which facilitates residential real estate transactions.
The platform empowers brokers, franchisees, and agents to provide a seamless transaction process for consumers, while offering a flat transaction fee for franchisees and agents.
This business model has fueled HomeSmart’s expansion, and as of now, the company has over 23,000 agents across 194 offices in 47 states.
In 2020, HomeSmart was ranked in the top five residential real estate brokerages by the number of transaction sides in the United States.
Financial Performance
In terms of financial performance, HomeSmart Holdings has seen significant growth in revenue. In 2020, the company’s revenue was $475.03 million, up from $324.61 million in 2019, representing a YoY growth rate of 46.34%.
Despite the increase in revenue, the company’s net income growth was 26.02%, with a net income of $7.56 million in 2020, up from $6 million in 2019.
The gross margin remained constant at 100%, and the operating margin slightly decreased from 2.00% in 2019 to 1.97% in 2020. The company’s EBITDA margin also saw a slight increase from 2.18% in 2019 to 2.44% in 2020.
Revenue
| Year | Revenue (USD) |
|---|---|
| 2019 | $324.61 million |
| 2020 | $392.51 million |
| 2021 | $628 million |
Business Model
HomeSmart provides a technology platform for real estate agents, brokerages, franchisees, and others involved in real estate transactions in the U.S.
The company pursues relationships with independent brokerage firms and agents nationwide.
As of September 2021, HomeSmart had more than 23,000 agents in 194 offices in 27 states using its platform. The business model, while not high-margin, has enabled impressive revenue growth.
However, for significant profits, the model requires much higher revenue.
The Sales, Marketing, and Advertising efficiency rate, which is defined as how many dollars of additional new revenue are generated by each dollar of Sales, Marketing, and Advertising spend, was an incredibly high 40.8x in the most recent reporting period.
In the competitive landscape, HomeSmart’s competitors include Zillow, Appfolio, Corelogic, LoanDepot, Rocket Mortgage, eXp, Realogy, Re/Max, Redfin, Compass, among others.
In order to fuel further expansion, HomeSmart intends to raise $100 million in gross proceeds from an IPO of its common stock.
The net proceeds from the IPO will be used for general corporate purposes, including working capital, operating expenses, and capital expenditures.
Additionally, the company may use a portion of the net proceeds to acquire or invest in businesses, products, services, or technologies, though there are no agreements or commitments for any material acquisitions or investments at this time.
Estimated Valuation
| Year | Valuation (USD) |
|---|---|
| 2019 | $3.2 million |
| 2022 | $100 million |
Risk Factors
HomeSmart Holdings operates in the highly competitive real estate sector where the business model does not generate high margins, necessitating significant revenue for substantial profits.
Recent financial performance shows variable cash flow from operations and a swing to an operating loss in 2021, which could raise concerns about sustainability and profitability.
Despite strong topline revenue growth and an increase in gross profit, the company has seen a reduction in its gross margin.
The company’s financial health as of September 30, 2021, shows $9.2 million in cash and $35.7 million in total liabilities, signaling potential liquidity and solvency risks.
Market Opportunity
HomeSmart has positioned itself as a revolutionary real estate enterprise powered by a proprietary end-to-end technology platform.
Its business model focuses on providing a seamless transaction process for consumers, brokers, franchisees, and agents, offering a flat transaction fee structure.
This approach addresses the growing demand for a seamless home buying and selling experience, giving HomeSmart a unique market opportunity.
The company’s proprietary cloud-based platform is cost-effective and agent-centric, which could appeal to a broad spectrum of stakeholders in the residential real estate transaction process.
Competitors
- HomeServices of America Inc.
- Realogy Brokerage Group
- eXp Realty
- Compass
- Hanna Holdings Inc.
- Redfin
- United Real Estate
- @properties
- Fathom Realty