The road to profitability can be arduous, but Compass seems to be making up ground as the tech-focused brokerage saw higher earnings and modestly lower losses in the first three months of 2022.
In its latest earnings report, the New York-based company showed that it raked in $1.4 billion in the first quarter—up 25% from the same period last year. Compass also trimmed its net losses down to $188 million compared to the $212 million in Q1 2021.
Overall, Compass’s earnings report helped its performance in the stock market. In early trading Friday, the company gained 8.5%.
“We delivered $1.4 billion in revenue, a first-quarter record for Compass,” said Compass Founder, Chairman, and CEO Robert Reffkin. “Compass agents have consistently demonstrated their ability to grow in a variety of market conditions, and in the first quarter, they grew market share to 6.1%, our second highest market share quarter ever. This is even more impressive since the first quarter is typically our slowest volume quarter.”
Compass’s revenue growth was mainly due to increased total transactions and gross transaction value growth. Its agents closed 47,367 transactions last quarter—up 18% year-over-year—while the overall value of those sales increased by 23% YoY to $53.7 billion.
The company attributed the uptick to its tech stack and agent platform, helping its pool of real estate professionals.
“The Compass platform has been a major factor in our ability to take share by attracting agents and helping them grow their business,” Reffkin said. “We see the current macro uncertainty as an opportunity for us to extend our technology lead over the rest of the industry, creating an even wider moat.”
Reffkin also stated, “We have significant capacity to reduce spending as necessary while continuing to grow our business, improve our cash position and drive positive free cash flow in 2023.”
Despite the YoY decline in net losses, Compass tallied a higher net loss compared to the fourth quarter of last year, when the company shed $175 million. Adjusted EBITDA loss was $97 million in the first quarter.
According to the company, losses were heavily driven by non-cash, stock-based compensation expenses of $64 million.
During a call with investors, Reffkin struck an upbeat tone about his company’s ability to weather the shifting market conditions and stay on track toward its goals of attaining profitability in the coming years.
“I am pleased to report our balance sheet is strong,” he said, alluding to the company having $476 million in cash and access to a $350 million credit facility.
“While the real estate market outlook is uncertain, we have modeled out various negative industry scenarios,” Reffkin added. “In all cases, we believe we will have significant liquidity while still gaining market share. We are managing the business to ensure we will not require additional capital. To further emphasize the point, we are managing the business to ensure we will not require additional capital.”
Compass sees the upward trajectory of its revenue continuing with forecasts indicating as much as a $2.2 billion second-quarter performance.