Compass didn’t quite stay in the black in the third quarter, but it continued growing and generating cash in the face of a shrinking national real estate market and aired plans to rise as a listing authority.
The company recorded a net loss of $1.7 million in the third quarter, a $37.7 million improvement from last year, according to its earnings released Wednesday. The results are a dip from the second quarter when it posted its first positive net income in its history as a public company.
Revenue grew almost 12 percent to $1.5 billion in the third quarter, and transaction growth over 16 percent. The company also reported $32.8 million in free cash flow, its third straight quarter and fifth of the last six quarters with positive cash flow.
Compass reiterated its expectation to be free cash flow positive for the entire year and said it now expects to generate over $100 million in adjusted EBITDA for 2024 after posting an adjusted EBITDA of $52 million in the third quarter. The company bumped its cash on hand to over $211 million from nearly $186 million.
CEO Robert Reffkin touted the results on Wednesday’s earnings call, pointing to “the challenging market backdrop with existing home sales at three-decade lows.”
Existing home sales for the first nine months of the year were below 2023 levels, with home sales on track for their lowest total since 1995.
Reffkin also doubled down on his vocal opposition to the National Association of Realtors’ Clear Cooperation Policy and took a swipe at unnamed “powerful websites in real estate” that he says are based on selling buyer leads.
“The future we are creating is one where buyers will know to search Compass.com, as we become known as the place homeowners list their homes early,” Reffkin said.
He added that he considers a CCP repeal as a high upside, albeit likely, case for the company, and believes that a rollback could either come naturally as MLSes remove the policy or from legal pressure from private party litigation.
The company is targeting 30 percent market share in its top 30 markets by the end of 2026. That goal will be aided by the launch of its reverse prospecting tool, which allows seller agents to see which Compass buyer agents have engaged with a listing.
Compass grew transactions by over 4 percent even when excluding the recent acquisitions of Tennessee-based Parks Real Estate and Louisiana-based Latter & Blum.
Principal agent count also increased by 2,927 agents, driven by the acquisitions, but the company added an additional 785 principal agents organically, its best quarter in three years, according to Reelitz.
Commission expenses ticked up to 82.2 percent from 82 percent last year, but Reelitz attributed its recent growth and M&A activity in more costly markets.
Reffkin added that the company has not seen “any meaningful” changes yet from the Aug. 17 rule changes stemming from NAR’s antitrust settlement.
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The company also improved its operating expenses excluding commissions and stock-based compensation to $215 million from almost $219 million year-over-year, which Reelitz attributed to improved agent marketing efficiency.
Reelitz said the company has used some of the relatively strong operating expense performance to invest in its title and escrow business, which grew its attach rate by 7 percent across the past three quarters.
This article has been updated to specify Compass’ total quarters reporting cash flow positivity.