Compass beats revenue expectations, adds agents
While revenue improved 10%, the company reported steep losses — but CEO Robert Reffkin was more focused on the future of buyer agents during the earnings call.
Compass beat expectations for revenue, reporting a 10% gain, and was cash flow positive in the first quarter despite the continuing challenges in the housing market.
The cash flow turnaround is significant: A year ago, cash flow was negative $55.5 million; for the first quarter of 2024, it was a positive $8.6 million. During its Q4 earnings call, the company said it aimed to have positive cash flow throughout 2024.
The company also reported a year-over-year increase in its principal agent count, gaining nearly 1,000 principal agents in the past year. In addition to adding new agents, Compass said its agent retention rate was 96%, which allowed the company to increase its market share to 4.76%, up 26 basis points year-over-year.
What Compass had to say
Even with the better-than-expected results, CEO Robert Reffkin spent much of the earnings call focused not on financials but on the future of buyer agents. In his prepared remarks to investors, he said he doesn't expect to see big changes coming out of NAR's March 15 settlement in terms of representation and commission fees.
Citing MLS data for Compass areas post-settlement, Reffkin said more than 96% of all listings included sellers offering to pay 2% or more to buyer agents. More than 67% are offering 2.5% or more.
He believes homebuyers will continue to hire agents, and sellers will continue to see the value in offering to compensate buyer agents to help close a deal.
"Buyers and sellers are speaking with their checkbooks, and they prefer professional advice over a discount," Reffkin said.
He also touched on the company's future: "I believe Compass is approaching an inflection point. We have done the hard work. We have brought expenses down and continue to grow our agent count and inventory advantage. The market will inevitably come back, and when the Fed cuts rates, we will be in a position to thrive," said Reffkin.
Key numbers
Revenue: Revenue for the first quarter was $1.05 billion, a 10% increase year-over-year as transactions increased 7.1%.
Cash and cash equivalents: $165.9 million, with no draw from revolving credit. Cash on hand was down slightly from $166.9 million at the end of 2023.
Net income/loss: A net loss of $132.9 million, which is worse than the company's $83.7 million loss at the end of 2023, but a $17.5 million improvement compared to a year ago.
Adjusted EBITDA: A loss of $20.1 million in the first quarter, compared to a $67.1 million loss a year ago.
Transactions: Compass agents closed 38,449 transactions in the first quarter, down from 40,621 transactions in Q4 2023 but up 7.1% year-over-year.
Agent count: Average number of principal agents was 14,591, down slightly from 14,689 for the fourth quarter, but an increase of 990 agents from a year ago.
Second-quarter outlook: The company expects revenue of between $1.6 billion to $1.7 billion, with an adjusted EBITDA of between $55 million and $75 million.
Notable moves
In March, Compass joined with several other large brokerages in reaching a settlement agreement in the buyer agent commissions cases. The company will pay $57.5 million to resolve the lawsuits.
Reffkin said the Compass Client Dashboard is on track for a pre-release test period in the fourth quarter of 2024. The dashboard will give clients insight into what their agents are doing each day to complete a transaction. Reffkin said it will be like a visual receipt that helps consumers understand the agents' value.
"I believe it's going to be a transformational moment for the company," he said.