Compass earnings down - Robert Reffkin
Illustration by Lanette Behiry/Adobe Stock

Compass loses $150 million, but finds reasons for optimism 

With the rollout underway for its end-to-end transaction platform, and agent count up, Compass projects that it will be cash-flow positive next quarter.

May 9, 2023
3 mins

Continuing a trend seen in this season's real estate company earnings reports, Compass reported losses that weren't as bad as many feared.

The real estate brokerage announced $957 million in revenue for the first quarter, down 31% compared to a year ago, but above the company guidance of between $850 million and $950 million. The company also posted a net loss of $150 million, which is less than the $188 million net loss it took a year ago.

In an earnings call, CEO Robert Reffkin was particularly excited about the company's end-to-end platform. He announced Compass successfully rolled out its title and escrow business integration into the platform in Southern California.

"We have taken a massive step toward digitizing the real estate transaction process," Reffkin said. "We are very excited by the early results and feedback we are receiving from agents."

The company is also cautiously optimistic about the overall real estate market for the rest of the year — and its agents ability to navigate its challenges "with incredible strength," said Chief Financial Officer Kalani Reelitz. He projected that the company will be cash-flow positive by the end of the second quarter and for the year.

Key numbers

Revenue: $957 million, down 31% year-over-year as transactions declined 24% because of the overall market slowdown.

Cash and cash equivalents: $364 million, which includes a $75 million draw that was "taken out of an abundance of caution due to the recent banking crisis." That $75 million was repaid in April.

Net income/loss: A loss of $150 million, an improvement over the company's $188 million loss a year earlier.

Adjusted EBITDA: A loss of $67 million in the first quarter of 2023 vs. a loss of $97 million in the first quarter of 2022.

Transactions: 35,886 transactions closed, down 24% year over year.

Agent count: 13,515 principal agents during the first quarter of 2023, a 6% increase over last year.

What to expect for the second quarter: Revenue of $1.45 billion to $1.6 billion; adjusted EBITDA of $30 million to $50 million.

What Compass had to say

Compass leaders fielded questions about artificial intelligence, as well as the company's agent count, which grew 6% year-over-year during a time when many agents are leaving the industry altogether.

In addressing artificial intelligence, Chief Operating Officer Greg Hart said Compass agents have been benefiting from that technology for years and that those benefits will continue to grow. That's because the company's end-to-end platform rollout will provide more data that AI can work with.

"AI is really dependent on data to drive its performance," Hart said. "So we believe that will enhance our competitive differentiation over time and it certainly already has."

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