Is Compass the next WeWork?

David Goldsmith

All Powerful Moderator
Staff member
Compass revenue soars 80% in Q1
Brokerage beat analysts’ revenue predictions for first quarterly earnings report

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.

Compass’ revenue is up 80 percent year-over-year from 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.

“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.”

The company reported a net loss of $212 million, with $149 million attributed to a one-time non-cash charge related to stock-based compensation as part of its initial public offering.

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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.
 

David Goldsmith

All Powerful Moderator
Staff member

Christie’s affiliate in NJ sues Compass for poaching, stealing trade secrets​

Lawsuit accuses Compass, four agents of violating contracts, misappropriating confidential data and soliciting clients​

Compass has been hit with another lawsuit regarding recruitment — this time in northern New Jersey.
The complaint, filed by a Christie’s International Real Estate affiliate based in Ridgewood, New Jersey, accuses Compass of soliciting a team of four agents and unlawfully encouraging them to breach their existing contracts.

The agents — Maryanne Elsaesser and her team members Mathew Chapman, Rhonda Battifarano and Michele Kowal — are also named in the suit, which was filed in civil court in Bergen County, New Jersey. Christie’s accuses them of violating the terms of their contracts, improperly soliciting clients and continuing to use the firm’s confidential information.
Christie’s was seeking a temporary restraining order and permanent injunctive relief against Compass and its former agents, as well as money damages. After publication, a representative for Compass said the request for a temporary restraining order was denied by a judge.
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The suit claims Elsaesser was “the main driver of this scheme” for introducing her team to Compass strategic growth manager Adam Leshaw in March. About a month later, all four agents resigned.
It also claims the agents improperly solicited clients when they attempted to transfer listings from Christie’s to Compass on the New Jersey Multiple Listing Service, and that Elsaesser withdrew three listing agreements that were pending with Christie’s. In court documents, the firm included an email from Elsaesser where she instructed her team to “keep a log” on a deal where she spoke with a client after they’d spoken with a Christie’s agent.

According to the agents’ contracts, they are banned from attempting to hire fellow agents or company employees for a period of two years after they leave, using company information or interfering with former clients while working at Christie’s.

The firm also claimed Compass was fully aware of these terms “but nonetheless solicited [the agents],” the complaint reads. “As reflected by numerous lawsuits filed across the country, Compass has a pattern and practice of poaching.”
Compass’ recruitment strategy has led to numerous lawsuits since 2014 with accusations ranging from price-fixing and collusion to poaching tech talent to stealing $2 million worth of leads. Last month, Howard Hanna sued Compass for allegedly encouraging three of its agents in Pennsylvania to breach their contracts, specifically their non-compete, non-solicitation and confidentiality provisions, by switching brokerages.

Christie’s also alleged that its former agents took confidential information with them in the form of both listings and “pricing and pricing strategy,” which will give them the ability to “unfairly” win business from the firm’s existing and future clients.
A Compass spokesperson called the allegations “clearly opportunistic and entirely without merit.”
“Our focus remains on empowering agents to grow their business, and we believe in their right to choose the brokerage that serves them best,” the spokesperson continued in a statement.
In recent years, Compass has taken steps to defend itself against accusations of stolen data by adopting a common practice in Silicon Valley: New hires must sign an agreement that defines what agents cannot bring with them to Compass and threatens disciplinary action if they don’t comply.

Michael Hensely, an attorney representing Christie’s, said his client intends to “vigorously pursue” the matter and declined to comment further.
Contact Erin Hudson
 

David Goldsmith

All Powerful Moderator
Staff member

Real New York sues Compass agents for breach of contract​

The brokerage is seeking $900,000 from its former agents; Compass is not named as a defendant​

Two Compass agents are in hot water with their former brokerage.
Real New York is suing former agents Lyndsey Casagrande and Kenny Fung, alleging breach of contract and misappropriation of its confidential information, according to the complaint filed last week in a New York court.

The firm accuses its former agents of continuing to use leads and confidential information from its company files and data as they do business at Compass — and soliciting Real New York’s clients to move with them.

Real New York also claims that Casagrande and Fung recruited four of its other agents to join them at Compass. The brokerage, which was founded by brokers Louis Adler and Robert Rahmanian in 2013, seeks a $900,000 money judgement from the two agents. Compass is not named as a defendant.
Casagrande, Fung and Compass declined to comment. Neither Adler, Rahmanian nor their lawyer immediately responded to requests for comment.

Though Compass is not directly implicated in the case, several of the complaint’s allegations — particularly breach of contract and stealing trade secrets — have been leveled against the brokerage before. Agents who left other brokerages for Compass are frequently named as co-defendants in these cases.

Last week, a Christie’s International Real Estate affiliate based in Ridgewood, New Jersey sued Compass and four agents for breach of contract and misappropriation of confidential company information. Compass was named in the suit for unlawfully encouraging the agents to violate the terms of their contract.

In April, Howard Hanna sued Compass for allegedly encouraging three of its agents in Pennsylvania to breach their contracts, specifically their non-compete, non-solicitation and confidentiality provisions, by switching brokerages. Days later, The Agency sued Compass over its own non-solicitation clauses, claiming that the brokerage was illegally preventing one of its agents from recruiting her former Compass colleagues to join her.

The accusations are nothing new. Beginning in 2016, Compass began taking pains to defend itself by requiring new hires to sign an agreement defining the proprietary, confidential data that belongs to its competitors and threatening disciplinary action if they bring it with them.
 

David Goldsmith

All Powerful Moderator
Staff member

REBNY fires back at Compass in lawsuit over recruiting​

Trade group says brokerage’s growth undermines claim of being stymied​

Sparks are flying in the legal feud between the Real Estate Board of New York and Compass.
REBNY filed a motion Tuesday to dismiss the brokerage’s federal lawsuit against it, saying Compass’ allegations lack credibility.

Compass sued in March, accusing the trade organization of conspiring with its biggest New York City rivals, the Corcoran Group and Douglas Elliman.
All three brokerages are REBNY members and subject to a REBNY policy that governs how New York agents share listings. Compass’ suit says its growth in New York City was stymied by changes in 2018 to the policy, known as the universal co-brokerage agreement.

Compass claims REBNY has applied the agreement in a “discriminatory manner” that limits its ability to recruit agents. REBNY fined Compass $250,000 in January for repeatedly violating its terms.

For exclusive listings, the agreement bars agents from further contact with their clients if they leave the firm that has the exclusive. In court documents, REBNY argues that the UCBA applies to its members equally and does not prevent brokerages from retaining exclusive listings or from recruiting agents.

“Stripped of its loose use of antitrust buzzwords, bluster, marketing puffery, and invective, [Compass’] complaint does not come close to alleging plausible claims,” wrote REBNY’s lawyer on the case, Claude Szyfer of Stroock.
James Whelan, president of REBNY, called Compass’ allegations “meritless.”

“Compass has grown rapidly despite its hollow claims of anti-competitive behavior and continues to successfully recruit agents,” he said in a statement.
The Real Deal’s annual rankings of the city’s brokerages reflect that growth. In 2018, Compass had 872 agents and closed just over $2 billion in sell-side deals in Manhattan. Last year the brokerage was the city’s top recruiter, finishing the year with 2,485 agents and more than $2.5 billion in sell-side deals closed in Manhattan — and $4 billion if Brooklyn and Queens are included.

Compass, which went public last month, has nearly 21,000 agents across 47 different U.S. markets. The company lost $212.4 million in the first quarter, despite revenue jumping, because expenses ballooned.
A spokesperson for Compass called REBNY’s motion to dismiss “without merit.”

“We intend to oppose it and move forward with our case,” the spokesperson said in an email.


 

David Goldsmith

All Powerful Moderator
Staff member

Compass’ trail of litigation over its business tactics​

The brokerage has been sued nine times in the first half of 2021, the latest in a long line of disputes​

Defrauding agents. Illegal telemarketing. Encouraging breach of contract. Stealing trade secrets from rival firms. These are just some of the allegations leveled against Compass so far this year.

The brokerage, which went public in April, is involved in nearly a dozen active lawsuits dating as far back as 2014. In the majority of these cases, Compass finds itself playing defense. Plaintiffs include local rivals, former agents, concerned citizens and a housing watchdog group. Several cases, both active and settled, are related to the firm’s recruitment tactics.
 

David Goldsmith

All Powerful Moderator
Staff member

Compass shares lost more than $3B of value in three months of trading​

Compass shares ended trading on Wednesday at $12.25​

It took Compass just three months as a public company to lose more than $3 billion of market value.

The stock closed at $12.25 on Wednesday, a new low that gave the company a market value of $4.7 billion. That’s a drop of 39 percent from its starting price of $20.15 at its April 1 debut on the New York Stock Exchange. At that price, the company was worth about $7.8 billion.
 

David Goldsmith

All Powerful Moderator
Staff member
Compass revenue almost triples, but company lost $7M

Reffkin promises investors that Compass’ end-to-end tech platform will be ready by next summer​

Compass’ losses are narrowing as revenue surges, while top executives are focused on explaining how the company will become profitable and why they are in fact a technology company.
The residential brokerage’s quarterly revenue jumped 186 percent year-over-year to $1.95 billion, the company reported Monday in its second-quarter earnings. Compass reported a net loss of $7 million for the quarter, an improvement from a loss of $84 million in the same period a year earlier.

The company’s expenses for the quarter totalled $1.96 billion, up from $767.7 million a year ago. Agent commissions and stock-based compensation totaled $1.59 billion, which was again the biggest expense. Second-biggest was sales and marketing, accounting for $124 million.

The brokerage reported a record number of closed sales, 65,743, during the quarter with a gross value of $77 billion. (Compass counts sales and the value twice if its agents represent both the buyer and seller.)
Pointing to Compass’ record quarterly revenue and closed transactions, Chief Executive Robert Reffkin told investors during Monday’s earnings call that the company would be “profitable on an adjusted EBITDA basis for the full fiscal year of 2022.” He added that was a “year earlier than we previously expected.”

The figure, adjusted EBITDA, or earnings before interest, taxes, depreciation and amortization, is an alternative measure companies include on top of the financials that Compass must report according to the U.S. Securities and Exchange Commission’s public disclosure rules. Companies offer such alternatives to net income, arguing that’s how they internally measure their success. Critics say the measure misrepresents earnings.

Compass’ adjusted-EBITDA excluded $78.9 million in expenses, $54.3 million of which was stock-based compensation, showing Compass earned $71.3 million in the quarter, instead of losing $7 million.
Kristen Ankerbrandt, Compass’ CFO, also focused her remarks on the company’s path to profitability. She said the company ramped up its investment in areas of growth that they expect “will drive long-term profitability.”

Two concrete examples included the company’s launch of its mortgage business OriginPoint last month and its expansion into 15 new markets. Ankerbrandt said the mortgage business was originally planned to start next year and that Compass typically only opens in two markets per quarter. She attributed the accelerated time frame to “Q2 outperformance combined with our strong future outlook.”

She said OriginPoint would begin originating mortgages by the end of the year and be operating in all Compass markets by the end of 2022. Compass’ title and escrow services are operating in parts of California, Florida, Washington State, Maryland, Virginia and Washington D.C.
Ankerbrandt said Compass’ ability to expand was most dependent on recruiting and retaining agents and increasing transactions. She told investors she was confident Compass would deliver as “we have done this consistently.”

Compass added 817 principal agents last quarter, bringing its total headcount to 10,629 principals. On average, each principal agent closed 6.2 deals in the quarter. The company also added 15 new markets last quarter; Compass is now operating in a total of 62 markets.
Ankerbrandt said that half of those markets are in the “investment phase” but she said that the company’s rule of thumb is that its markets will become profitable within three years.

Reffkin also spent a considerable amount of time during the call explaining Compass’ technological edge.
“I know that many of you see us as just a brokerage,” he told analysts. “But our strategy at Compass is to be much more than a brokerage. Over time you will see how our platform powers a larger number of adjacent services… creating a long term sustainable financial advantage.”

He also gave himself a deadline to prove it to them.
“By next summer, we expect to be the first company to provide agents with a platform that will allow them to facilitate the full transaction in one place, without having to pay for or log on to any third-party real estate software,” he said.
Compass’ shares closed at $15.28 Monday, up more than 5 percent from the morning’s open. It continued to surge in after-hours trading to $16.30 at 4:43 p.m.
 

Noah Rosenblatt

Talking Manhattan on UrbanDigs.com
Staff member
Compass revenue almost triples, but company lost $7M

Reffkin promises investors that Compass’ end-to-end tech platform will be ready by next summer​

Compass’ losses are narrowing as revenue surges, while top executives are focused on explaining how the company will become profitable and why they are in fact a technology company.
The residential brokerage’s quarterly revenue jumped 186 percent year-over-year to $1.95 billion, the company reported Monday in its second-quarter earnings. Compass reported a net loss of $7 million for the quarter, an improvement from a loss of $84 million in the same period a year earlier.

The company’s expenses for the quarter totalled $1.96 billion, up from $767.7 million a year ago. Agent commissions and stock-based compensation totaled $1.59 billion, which was again the biggest expense. Second-biggest was sales and marketing, accounting for $124 million.

The brokerage reported a record number of closed sales, 65,743, during the quarter with a gross value of $77 billion. (Compass counts sales and the value twice if its agents represent both the buyer and seller.)
Pointing to Compass’ record quarterly revenue and closed transactions, Chief Executive Robert Reffkin told investors during Monday’s earnings call that the company would be “profitable on an adjusted EBITDA basis for the full fiscal year of 2022.” He added that was a “year earlier than we previously expected.”

The figure, adjusted EBITDA, or earnings before interest, taxes, depreciation and amortization, is an alternative measure companies include on top of the financials that Compass must report according to the U.S. Securities and Exchange Commission’s public disclosure rules. Companies offer such alternatives to net income, arguing that’s how they internally measure their success. Critics say the measure misrepresents earnings.

Compass’ adjusted-EBITDA excluded $78.9 million in expenses, $54.3 million of which was stock-based compensation, showing Compass earned $71.3 million in the quarter, instead of losing $7 million.
Kristen Ankerbrandt, Compass’ CFO, also focused her remarks on the company’s path to profitability. She said the company ramped up its investment in areas of growth that they expect “will drive long-term profitability.”

Two concrete examples included the company’s launch of its mortgage business OriginPoint last month and its expansion into 15 new markets. Ankerbrandt said the mortgage business was originally planned to start next year and that Compass typically only opens in two markets per quarter. She attributed the accelerated time frame to “Q2 outperformance combined with our strong future outlook.”

She said OriginPoint would begin originating mortgages by the end of the year and be operating in all Compass markets by the end of 2022. Compass’ title and escrow services are operating in parts of California, Florida, Washington State, Maryland, Virginia and Washington D.C.
Ankerbrandt said Compass’ ability to expand was most dependent on recruiting and retaining agents and increasing transactions. She told investors she was confident Compass would deliver as “we have done this consistently.”

Compass added 817 principal agents last quarter, bringing its total headcount to 10,629 principals. On average, each principal agent closed 6.2 deals in the quarter. The company also added 15 new markets last quarter; Compass is now operating in a total of 62 markets.
Ankerbrandt said that half of those markets are in the “investment phase” but she said that the company’s rule of thumb is that its markets will become profitable within three years.

Reffkin also spent a considerable amount of time during the call explaining Compass’ technological edge.
“I know that many of you see us as just a brokerage,” he told analysts. “But our strategy at Compass is to be much more than a brokerage. Over time you will see how our platform powers a larger number of adjacent services… creating a long term sustainable financial advantage.”

He also gave himself a deadline to prove it to them.
“By next summer, we expect to be the first company to provide agents with a platform that will allow them to facilitate the full transaction in one place, without having to pay for or log on to any third-party real estate software,” he said.
Compass’ shares closed at $15.28 Monday, up more than 5 percent from the morning’s open. It continued to surge in after-hours trading to $16.30 at 4:43 p.m.
I admit i bought a bunch of $COMP shares on this dip the last few months. I believe in mgmt of this company. They will find and sniff out revenue and cut expenses after they bring in tons of top talent/inventory (listing side). Its all about inventory. Then you monetize every layer of the transaction and monetize your agents. Many ways to create revenue from data/professionals
 

David Goldsmith

All Powerful Moderator
Staff member
Compass west region president Kamini Lane exits

3rd high-profile departure at Compass' West Coast division in recent weeks​

Kamini Lane has left her position as president of Compass’ west region, exiting the brokerage from one of its top executive roles, The Real Deal has learned.
“Compass and Kamini Lane have mutually agreed to part ways,” a Compass spokesperson said Thursday afternoon in an emailed statement. “Compass thanks Kamini for her contributions to Compass and wishes her the best of luck in her future endeavors.”
Rory Golod, Compass’ New York regional president, will take over interim duties as head of the west region, sources said.

Lane joined the brokerage in early 2019 as a general manager, according to her LinkedIn page. She was promoted to president of Compass’ Southern California operations, before landing her latest role in November 2020.
Lane left the job several days ago for personal reasons, sources said. She did not respond to a request for comment.

Prior to joining Compass, Lane served as chief marketing officer for Tradesy, an online women’s fashion marketplace.
The departure is the third high-profile exit at Compass’ West Coast division in recent weeks.
In July, Los Angeles broker Adam Rosenfeld and his eight-person team left the brokerage for The Agency, and last month Mark McLaughlin, Compass’ California president, announced he would be leaving on Sept. 30.

Reached in Wyoming, where he owns a house, McLaughlin called Lane a “dynamo” and said she would “resurface again somewhere soon.”
 
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