Compass closed the books on a headline-heavy third quarter while touting its plans for its industry-shaking merger.
The residential giant reported a number of records in its third-quarter earnings despite another slow period for the housing market.
The firm reported revenue growth of nearly 24 percent to a third-quarter record of $1.85 billion, driven by transaction growth of 22 percent despite the market growing just 2 percent. Its organic transactions grew by 7 percent, also outpacing the market.
The firm also recruited 851 principal agents in the quarter, a company record for any quarter. Reffkin said he expects to add 700 to 800 principal agents going forward on a quarterly basis.
Compass’ net loss was $4.6 million in the third quarter, a dip from its loss of $1.7 million a year ago, partially attributable to $7.5 million in expenses as part of the Anywhere deal. The result comes one quarter after the firm reported a record $39.4 of net income in the second quarter of last year.
Compass also reported its seventh consecutive quarter of positive free cash flow, at $73.6 million and ended the quarter with roughly $170 million in cash, down from nearly $224 million at the start of the year.
Compass is projecting $1.59 billion to $1.69 billion in revenue in the fourth quarter and reduced its full-year operating expenditure projections to between $1 billion and $1.005 billion, down from $1.01 billion to $1.02 billion.
Impending mega-merger
Reffkin on the call responded directly to concerns over the proposed $1.6 billion merger with Anywhere Real Estate and personally committed to higher than previously projected cost reductions in the deal.
Reffkin pointed to the successes in the firm’s deal for Christie’s International Real Estate, claiming it has since grown its net principal agents, as evidence it can continue to outpace the market once its M&A deals have closed. The firm will pause on tuck-in M&A while focusing on the Anywhere integration, according to Reffkin.
He added that the Christie’s title business has seen a 10 percent increase in attach rates, improved the profitability of Christie’s and Compass’ mortgage businesses and is on track to reduce costs by $30 million.
“We have proven an ability to drive both top- and bottom-line growth in [Christie’s] post-close, and to do so organically,” Reffkin said. “While we recognize that the Anywhere transaction is clearly much bigger in size, we are confident that we can replicate the [Christie’s] playbook at Anywhere over time.”
Reffkin also provided an update to the firm’s initial targets around the Anywhere deal. After initially projecting to find at least $225 million of cost synergies, Reffkin made a commitment to do more on the call.
“I am personally committing today that we will deliver more than $300 million in net cost synergies,” Reffkin said. “This is a CEO commitment.”
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