Compass continues to add agents, improves losses
Revenue dipped, but Compass managed to gain more than 1,000 agents in 2023 and cut losses for the year nearly by half.
As it continued to cut expenses, Compass was able to weather the challenging fourth quarter better than some of its industry peers.
In its earnings report released today, the company reported fourth-quarter revenue of $1.1 billion, which was in line with expectations but down 1.1% compared to the fourth quarter of 2022. For the year, the company posted $4.9 billion in revenue, down from $6 billion in 2022.
While revenue declined for many brokerage companies, Compass was able to buck the industry trend of falling agent counts. Compass reported that its agent count increased by more than 1,000 year-over-year. It also achieved positive cash flow in two quarters in 2023 and expects to be cash-flow positive in 2024.
A robust technology platform designed to improve productivity contributed to the company's agent retention and growth, said Rory Golod, senior vice president of growth and communications at the company. He noted that agent retention was 97% during the fourth quarter, making the net gains more apparent.
In early after-hours trading, Compass stock was up nearly 4%.
What Compass had to say
"Over the past two years, we have successfully navigated the worst residential real estate market in decades and significantly reset our operating expense levels, positioning Compass for what we believe will be a significant upside when the market begins to recover," said Robert Reffkin, Founder and CEO of Compass.
Reffkin said the company is planning to be conservative with its 2024 budget, managing expenses on the assumption that transactions will remain flat for the year.
While remaining cost-conscious, Reffkin said he was optimistic about 2024.
"We believe that 2023 was the bottom of the downturn," Reffkin said. "Eventually the real estate market will get to more levels of transactions… and when it does, I'm confident that Compass is well positioned for success."
Key numbers
Revenue: Revenue for the fourth quarter was $1.1 billion, a 1.1% year-over-year decline, as transactions fell by 4.9%. Annual revenue was $4.9 billion in 2023, down 19% from $6 billion in 2022.
Cash and cash equivalents: $166.9 million, with no draw from revolving credit. The company ended 2022 with $361.9 million and attributed the decline in 2023 to debt repayments.
Net income/loss: A net loss of $83.7 million, a significant improvement compared to a year ago, when the company posted a $158.1 million loss. For 2023, the net loss was $321.3 million, down 47% from 2022's loss of $601.5 million.
Adjusted EBITDA: A loss of $23.7 million in the fourth quarter, compared to a $75.3 million loss in Q4 2022. For the year, a loss of $38.9 million, well below the $210 million loss reported in 2022.
Transactions: Compass agents closed 40,621 transactions in Q4 2023, a decline of 4.9% compared to Q4 2022. For the full year, Compass' transactions declined 15.5% compared to 2022.
Agent count: Average number of Principal Agents was 14,689 for the fourth quarter, an increase of 1,046 principal agents compared to Q4 2022.
First-quarter outlook: The company expects revenue of $975 million to $1.075 billion and an adjusted EBITDA of negative $22 million to negative $40 million.
Notable moves
The company announced earlier this month that Mollie Poe and Declan Hickey, who helped found the Compass San Francisco office, returned to the company after leaving for Side in 2020. Their team generated $110 million in sales volume in 2023.
Other teams joining Compass in the past few months include luxury agent and social media influencer Randy Baruh, who brought his team from Corcoran to Compass, and "Million Dollar Listing" agent Scott Fava, who returned to Compass after leaving in 2019 and rejoined with his Manhattan and Brooklyn-focused team.
In December, it was revealed that COO Greg Hart, who joined the company in 2020 as chief product officer, would depart at the end of the year with the elimination of his role.
Hart became COO in May 2022, a role that "unfortunately has become redundant" now that the tech platform is essentially complete, BTIG analyst Soham Bonsle remarked.