Looking back with relief and ahead with confidence, while facing challenges of the now, Robert Reffkin, founder and CEO of Compass, offered upbeat views during the company’s Q4 earnings report February 28. The numbers, however, were a bit more sobering.
Compass showed that between October and December 2022 it earned $1.11 billion in revenue, down from $1.6 billion during the same period in 2021. The tech-enabled real estate brokerage further suffered a loss of $158 million during the fourth quarter compared to the $175 million lost during the final three months of 2021.
Related: Compass Tallies Lower Earnings and Higher Losses in Q3
Nevertheless, Reffkin was both optimistic and bullish on Compass’ future, noting specifically that agent retention was strong.
“2022 was a difficult year for the residential real estate market and Compass,” he began. “The unexpected and rapid 18% decline in industry-wide transactions resulted in one of the worst years for the market, and a decline at the same rate as the 2007-2008 housing crisis. Despite industry challenges, Compass increased marketshare year-over-year with transactions being down 6% compared to the industry decline of 18% year-over-year. Moreover, our principal agent retention for Q4 2022 was 98%, which is the same as Q3 2022 and Q4 2021. We attribute a significant amount of our agents’ productivity to our differentiated technology platform, which is the only proprietary end-to-end technology platform for agents in the country.”
For full-year 2022, Compass lost $602 million, up from $494 million one year earlier. The company’s current stock price of $3.61 is up from the $2.35 in early January of this year, but well below the $6 mark of mid-2022.
Reffkin explained during the call that Compass plans to be free cash flow positive soon, meaning money coming in will exceed funds flowing out. But he also cautioned that cost cutting could continue if market conditions remain uncertain.
“We shared on our third quarter call that we intend to develop and implement a plan to further reduce our non-GAAP operating expenses to a range of $850 million to $950 million,” he said. “As we reported in early January, we believe our actions make it possible to achieve below the middle of the $850 million to $950 million range of annualized operating expenses by the fourth quarter of 2023. As a result of investments in prior years, even at this reduced level of operating expenses, we continue to invest in growth and technology to further strengthen the company during this downturn in the market. We are seeing industry forecasts for negative volume of 22.6% from Fannie Mae, negative 18.6% from MBA and negative 12.6% from NAR.
“Our employees have worked incredibly hard to reset our cost base over the last 12 months. We believe it’s the right cost base, and we are committed to maintaining our operating expense levels even if and when the market goes up. We continue to differentiate ourselves through our technology platform. It is an asset for Compass because it helps attract and retain agents. It helps make them more productive. It also gives us the ability to attach other services which will further monetize the platform.”
