In its first-ever earning report as a publicly traded company, Compass reported $1.1 billion in revenue during the first quarter of 2021 — an 80 percent increase from the first quarter of 2020. Although the company’s net losses still measure in the nine figures, Compass has reduced its net losses from $281 million to $212 million, which includes a one-time non-cash charge of $149 million for stock-based compensation from the company’s April 1 initial public offering.
The company’s adjusted EBITDA (earnings with interest, taxes, depreciation, and amortization) decreased from $102 million in Q1 2020 to $31 million in Q1 2021, with an adjusted margin of 2.7 percent. The company’s commissions and other related expenses reached $942 million, which also includes stock-based compensation from the IPO.
Compass CEO Robert Reffkin said he’s “thrilled” with the company’s first-quarter results, as he says they reflect the company’s reignited market and agent growth and tech investments.
“In Q1, we executed against our growth strategy, thoughtfully expanded our business geographically and added new functionality to our end-to-end platform for agents,” Reffkin said in a written statement before an earnings call Thursday afternoon. “Throughout the quarter our platform has allowed Compass agents to close more transactions and sell homes in fewer days than the industry average.”
In the first quarter of 2021, Compass grew its principal agent (i.e. team leader) count 20 percent year over year to 9,812. The principal agent count growth accounts for new office openings in existing and newly-added markets, including Providence, Rhode Island; Wilmington, Delaware; and Tampa, Florida. In total, Compass boasts 21,000 non-principal agents across 47 markets.
Thanks to a hot housing market, Compass agents increased their closed transaction sides 67 percent year over year to 40,268. Transactions per principal agent increased 39 percent year over year for what Compass called “the highest number of transactions for a first quarter in Compass’ history and the third-highest quarterly level of transactions ever.”
As a result, Compass’ national market share increased from 3.8 percent in Q1 2020 to 5.2 percent in Q1 2021.
Compass’ technology arm experienced robust growth as well, with total sessions on its platform increasing 120 percent year-over-year. Likely spurred by the pandemic and transition to remote working, the agent adoption rate of Compass’ proprietary platform increased 5 percent annually to 91 percent, the company said.
“Our platform is driving these outsized results as it helps our agents grow their business. This can be seen in our results as we grew faster than the residential real estate market,” Reffkin added.
The company is hopeful about the upcoming year, as executives expect continued buyer demand primarily led by millennials and professionals to push sales growth even as inventory drops. “We know how to grow [market] share and we’re confident that we can continue to grow share cost-efficiently by simply replicating our expansion playbook, including through our Compass Anywhere program,” Reffkin said during the call.
The CEO is also betting on a hearty return from its KVS Title and Glide acquisitions, as they plan to double down on providing adjacent services, such as title, escrow, and other mortgage services in the future.
“The first quarter of 2021 provides a strong start our journey as a public company, he said. “At Compass, our strategy is to replace today’s overly complex, paper-driven antiquated workflow with a seamless, all-digital end-to-end platform that empowers every real estate agent to provide exceptional experiences to their buyers and sellers.”
“This will take time and continued investment, but the opportunity is enormous,” he added.
Compass’ first-quarter earnings are a slim silver lining at the end of a turbulent first month as a public company. The company has faced four new class-action and theft of trade secrets lawsuits, and even their acquisition of Glide has allegedly sparked drama between the startup and the California Association of Realtors.
Compass’ performance on the stock market has taken a downturn, with Compass’ stock (NYSE: COMP) trading at an all-time low of $15.43 at market close on Tuesday. The stock took another tumble on Wednesday, with Compass’ price per share dipping as low as $14.37 before closing at $14.45. At that price, the company’s market capitalization sits just above $5.5 billion.
Even as Compass’ stock slides, Wall Street analysts remain bullish, according to investing site MarketBeat. Three analysts provided a ‘hold’ rating and six analysts provided a ‘buy’ rating, with a 12-month consensus price target of $23.00 and a possible upside of 56.04 percent.
Seeking Alpha analyst Gary Alexander said Compass’ stock market performance could be a blessing in disguise, as it presents investors an opportunity to latch onto Compass early and rake in profits if the stock rises. “I think the fall since [the IPO] presents investors with a chance to buy a long-term stake in a company I find much more attractive than Redfin,” he said while noting the brokerage’s explosive growth.
In T3 Sixty’s latest Mega 1000 released early Thursday, Compass was the third brokerage ever to cross $100 billion in annual sales volume due to a 66.2 percent jump in sales from 2019.