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Despite a sluggish and uncertain housing market, Compass revealed Monday that it experienced a strong first quarter of 2024, with key metrics such as revenue and agent count ticking up, while losses went down.
In total, the brokerage pulled in $1.05 billion in revenue between January and March, according to a new earnings report. That’s a 10 percent jump compared to the first quarter of 2023. In the report, Compass attributed the higher revenue to a 7.1 percent increase in transactions. The company achieved the revenue and transaction bumps even as the broader market saw transactions fall by 3.5 percent, the report further points out.
The company also managed to have positive free cash flow — in this case, $5.9 million — for the first time ever in a first quarter. That number is key because CEO Robert Reffkin has long been vocal about his goal of achieving positive free cash flow for a full year. The company originally believed it would hit that target last year but, amid a tough market, ultimately missed. However, achieving positive free cash flow in Q1 for the first time suggests the company could be on track to hit its goal this year.
Aside from free cash flow and revenue, Compass lost $132.9 million in the first quarter of 2024. That’s an improvement over the $150.2 million it lost one year prior. This year’s Q1 loss includes the full $57.5 million that Compass has agreed to pay as part of its settlement in multiple commission lawsuits.
Total principal agent count also rose 7.3 percent year over year in the first quarter, to 14,591. Agent count is also a key metric for brokerages because the total number of Realtors in the U.S. has lately been dropping thanks to the cooler market. That in turn has intensified competition among brokerages for top talent.
Robert Reffkin
In the report, Reffkin said that the company “exceeded our expectations for the quarter.” He also celebrated achieving positive free cash flow during “the industry’s slowest quarter of the year and in a historically challenging market.” Additionally, Reffkin touted the recent acquisition of Latter and Blum — which is not included in the Q1 agent count numbers — and added that Compass will be looking for future growth opportunities as well.
“We continue to look for accretive M&A transactions and to attract new agents organically as we successfully position Compass for what we believe will be significant upside when the market begins to recover,” Reffkin said.
Heading into Wednesday’s earnings report, shares in Compass were trading for around $3.28. That was down for the day and compared to the beginning of the year, when shares were fetching around $3.50.
Shares surged in after-hours trading Wednesday following the publication of Compass’ earnings report.
Credit: Google
Compass had a market cap of about $1.6 billion when markets closed Wednesday afternoon.
Compass last reported earnings in February, at which time it revealed that it brought in $1.1 billion in revenue between October and December of 2023. That represented a 1 percent year-over-year dip. The company also lost $83.7 million in Q4 2023, which was a 47 percent improvement over the loss of $158.1 million one year earlier.
During a call with analysts Wednesday afternoon, Reffkin discussed the fallout from the recent National Association of Realtors’ commission lawsuit settlement. Among other things, Reffkin argued that despite the settlement and “sensational” new headlines, his company’s research shows that consumers are still using agents and that most listings are still offering compensation to buyers’ brokers.
Reffkin added that he isn’t hearing from Compass agents in the field that commissions are falling or that sellers are generally shying away from offering compensation to buyers’ agents.
The takeaway, Reffkin argued, is that the settlement’s impacts may not be as disruptive as some have suggested. Reffkin ultimately argued that agents aren’t going away and that around 90 percent of consumers will continue to seek out professionals to handle their home transactions. He also noted that discounters of various flavors have existed for decades but have remained niche offerings with relatively small market share.
“Despite all of these attempts to disrupt the real estate agent, buyers and sellers are using agents more than ever before,” Reffkin argued.
Reffkin also said Compass’ agents are comparatively more productive than other agents and that Compass should be able to thrive in a post-settlement world.
“I see this for sure more as an opportunity than as a challenge,” he said.
Also during Wednesday’s call, Reffkin discussed the market, saying that “I still believe 2024 will be better than 2023, and 2025 will be better than 2024.” He added that increased inventory should improve market conditions in the near future. Additionally, the number of mortgage holders with rates under 4 percent is also falling, meaning fewer homeowners are locked into their current residences.
“We believe when rates come down,” Reffkin said, “it will create a massive surge in transactions. The longer [the downturn] lasts, the stronger the market bounce back will be.”
Update: This story was updated after publication with additional details from Compass’ earnings report and with commentary the company held Wednesday afternoon with analysts.
