Compass announced another round of layoffs on its path to profitability.
It’s the last round of layoffs the company will need to undertake to reduce its operating yearly expenses to between $850 million and $950 million, the company said in an SEC filing, levels which it believes will allow it to be cash-flow positive by the middle of the year.
“The company believes its actions allow for a path to achieve positive free cash flow in 2023 accounting for market scenarios that are worse than Fannie Mae’s negative 22.6% estimate for residential real estate transaction volume (price and units) in 2023,” the filing says.
The brokerage did not say how many employees are affected in the latest round. The filing announcing the reductions said the move would incur $10 million to $12 million in severance costs, just under the $15 million to $16 million incurred when it laid off 450 employees last June.
The company said in the SEC filing its US technology and engineering team, hit hard by previous layoffs, was not affected.
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A company spokesperson declined to comment on the layoffs.
CEO Robert Reffkin said in the company’s third quarter earnings call that it was planning for a “significant double-digit decline” in the market this year.
The New York-based company, which was the top brokerage nationally by sales volume in 2021, is seeking to become profitable for the first time amid a market downturn and a pullback from its largest investor, Softbank.
Compass said it lost $154 million in the third quarter of last year, up from $101 million in quarter two, along with an increased cash-burn rate. Investors initially responded well to information in the earnings report and the stock rose 90 percent the following day, though it was still down more than 60 percent since the start of 2022.
The company is expected to announced its fourth quarter and full-year earnings in February.