UPDATED, May 12 2021, 6:35 p.m.: The bar was set high for Compass’ first quarterly earnings report as a public company.
The brokerage, which went public on April 1, reported $1.1 billion in revenue for the quarter across 40,268 transactions valued at $43.8 billion.
“This was the best first quarter for transactions in our history and our third largest quarter ever,” said Robert Reffkin, the brokerage’s CEO and co-founder, on the company’s earnings call on Wednesday. “We see this momentum continuing into the second quarter.”
Compass’ revenue is up 80 percent year-over-year from $619.9 million in the first quarter of 2020, while the number of transactions increased 67 percent. According to Bloomberg, analysts expected the company to report $968.67 million in revenue.
Despite the gains, the company reported a net loss of $212.4 million. Compass’ expenses ballooned to a total of $1.3 billion from $754 million the year before. The company attributed $149 million of its total spend to a one-time non-cash charge related to stock-based compensation as part of its initial public offering.
While spending on research and development and general administration grew significantly, Compass’ biggest expense was paying out agent commissions, stock-based compensation related to its Agent Equity program, and fees paid to other brokerages for client referrals. The company spent $942 million in commissions and related expenses in the first quarter, or about 85 percent of its revenue.
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Compass lost $270M in 2020, revenue up 56% : IPO filing
Kristen Ankerbrandt, Compass’ CFO, noted that the margin of losses has narrowed compared to a year earlier.
“We’re growing fast on the top line but also showing improving margins and a commitment to financial discipline,” she said during the call.
The company’s net loss margin this quarter was 19 percent, compared to 21 percent in 2020. She pointed to a 15 percent cost reduction in terms of support services provided to agents using the Compass platform as one example. She also said that the firm’s remote work program, Compass Anywhere, allowed the company to expand into new markets at minimal cost.
Compass now operates in 47 markets, and added Delaware, Rhode Island and Tampa, Florida, to its roster during the first quarter.
Reffkin credited the results to Compass’ software platform: The number of sessions on the platform jumped 120 percent year-over-year. The ratio of daily active users to weekly active users — a metric used to track user retention — was 69 percent, up 7 percentage points from the same period last year.
He said the platform would provide agents and customers with “one login experience,” which would give it an advantage over its competitors. That would allow Compass to demand higher-than-market fees for additional services offered through the platform such as title, escrow and mortgage businesses. Reffkin said during the call that Compass was exploring a joint venture to offer mortgage products on its platform.
In its IPO filing, Compass reported losing $270.2 million last year while bringing in $3.7 billion in revenue, a 56 percent jump from $2.4 billion in revenue in 2019. As of Dec. 31, 2020, the firm has lost $1.1 billion.
Since it was founded in 2012, the firm has raised $1.5 billion from investors, including SoftBank, and has made waves in the brokerage industry by aggressively hiring from its competitors. Between 2018 and 2020, Compass spent $300 million acquiring firms such as Pacific Union International and Stribling & Associates.
Compass also grew its total headcount to nearly 21,000 agents, up from 19,000 at the end of 2020. Its total number of principal agents, which it uses to calculate key productivity metrics, is now 9,812.
When Compass stock began trading last month, the opening price was $21.25 per share, up from its IPO price of $18, but still well below the $10 billion valuation the company was initially targeting.
On Wednesday, Compass’ shares were valued at $15.43 at the start of trading, and fell to $14.45 throughout the day. But the stock rallied more than 9 percent to $15.81 per share 10 minutes after the company’s earnings were released.
This is a developing story. Check back for updates.