From Nasdaq.: 2025-02-18 20:15:11

Compass Inc. held its Q4 and full year 2024 financial results conference call, reporting a 25.9% year-over-year increase in revenue and $16.7 million in adjusted EBITDA for the quarter. The company recruited 669 principal agents organically and saw a 96.9% quarterly principal agent retention rate. Compass also achieved record title and escrow attach rates, with an 800 basis point improvement over the past four quarters. The company expects to double adjusted EBITDA in this business year over year by driving further improvement in their T&E attach rate.

In discussing their results, Compass CEO Robert Reffkin highlighted the company’s successful execution of their playbook, which involves controlling organic opex growth, growing market share, and expanding margin through increased attach rates and new high-margin businesses. The company’s playbook has allowed them to widen the gap between Compass and the industry, with total transactions growing 3.5 times faster than the market and organic transactions growing 2.3 times faster than the market. Reffkin expressed confidence in the company’s ability to generate hundreds of millions in adjusted EBITDA and free cash flow for shareholders as the market recovers. Compass plans to increase margins by hiring more productive, economically efficient agents and expanding high-margin integrated services like title and escrow. With the recent acquisition of Christie’s International Real Estate, Compass aims to grow its high-margin affiliate business significantly. The company saw a 65 basis point increase in market share in Q4 2024 and expects over 25% revenue growth in Q1 2025. Structural changes in the industry, including NAR no longer enforcing anti-competitive rules, are expected to benefit Compass due to its focus on experienced agents and large brokerages. The gap in income between new and experienced agents has widened post-MLS rule changes, favoring more experienced agents and larger brokerages. Compass is focusing on gaining more market share and increasing revenue, benefiting consumers by promoting competition among agents. The company highlights structural advantages such as an end-to-end platform, national scale, top agent network, and local market inventory depth. Their three-phase marketing strategy, including Compass Private Exclusives and Compass Coming Soon listings, has shown success with 35% of listings using this approach. Data indicates that pre-marketing properties with Compass before going active on the MLS leads to faster accepted offers and higher average closed prices, demonstrating the effectiveness of their marketing strategy for homeowners. Compass reveals that home listings off the MLS sell for more due to protection from negative insights. NAR’s Clear Cooperation Policy is under scrutiny for hindering homeowner value. The company’s Q4 revenue increased by 25.9%, exceeding the high end of their original guidance. The gross transaction value rose by 29.2% to 54 billion, with 20.9% attributed to organic growth. Commissions and expenses as a percent of revenue increased to 82.53%, impacted by M&A and agent mix. Total non-GAAP operating expenses were $224.4 million in Q4, a slight increase from the year-ago period, reflecting strong cost discipline. Compass has reported a strong fourth quarter, with adjusted EBITDA at 16.7 million, a significant improvement from a loss of 23.7 million the previous year. GAAP net loss for Q4 was 40.5 million, compared to 83.7 million in the same quarter in 2023. The company has also achieved positive free cash flow for six of the last seven quarters. For 2025, Compass expects opex growth of 3% to 4% and aims to maintain positive free cash flow throughout the year.

In addition, Compass has announced financial guidance for Q1 of 2025, expecting revenue between 1.35 billion to 1.475 billion. Adjusted EBITDA for Q1 is projected to be in the range of $11 million to $25 million. The company is focused on limiting opex growth to 3% to 4% organically and anticipates being free cash flow positive for the full year of 2025. With the recent acquisition of Christie’s International Real Estate, Compass aims to improve its consolidated results in the upcoming quarters. In modeling cash flow, it is essential to consider a two-year stack to adjust for timing items. Guidance for the first quarter includes a weighted average share count between 549 million to 552 million shares, reflecting an increase of 38 million shares related to the Christie’s International Real Estate purchase. Stock-based compensation is expected to be around 31 million for Q1. Compass reported record levels of adjusted EBITDA and free cash flow for 2024, with plans to continue momentum in 2025 with recent acquisitions, including brokerage operations in Chicago and Atlanta. Acquisition impact for the first quarter is estimated at nine points, with a similar impact expected for the rest of 2025. Compass One is driving a three-phase marketing approach with 3-4% organic expense growth to accelerate agent growth. With 30,000 agents each having an average of 3,000 contacts, Compass leverages agents to market directly to over 100 million people through digital newsletters, social media, and more. The platform allows agents to easily share marketing materials to enhance client relationships. CFO Kalani Reelitz expects meaningful free cash flow, focusing on fortifying the balance sheet, business investments, and potential shareholder returns. The company is also exploring opportunities for shareholder value and maintaining SBC levels. Compass’s unique three-phase marketing strategy is helping agents win listings without additional costs, giving them a competitive edge. There is no different commission structure for Private Exclusive, Coming Soon, or active listings. The strategy enhances professionalism and sophistication for agents and provides access to millions of buyers within the Compass network. Compass reported $500 million in revenue, with a focus on brokerage for continued growth. They anticipate adding 600-700 gross agents and maintaining a 90% annualized retention rate. The integration of Christie’s International Real Estate is ongoing, with a strong M&A pipeline expected. CEO Robert Reffkin envisions Compass becoming the go-to company for maximizing home sales value, attracting top agents and driving future success in the real estate market. The strategy includes leveraging tools like Private Exclusives and Coming Soon to gain market share and provide value to clients. Compass CEO Robert Reffkin criticizes trade groups for forcing agents to market properties a certain way. He believes agents should have more control over how they market their listings. Reffkin also discusses the trend of top agents outperforming and potentially seeing more commission compression for lower-performing agents. Compass has invested heavily in tech platforms and believes the industry will thrive with more freedom for top agents. Reffkin expresses gratitude to agents, employees, and shareholders for driving Compass’s success.



Read more at Nasdaq.: Compass (COMP) Q4 2024 Earnings Call Transcript