Yesterday was the Compass 2Q earnings call (transcript here) and as usual, the headlines focused on the net loss of $101.2 million – more than half of which was stock-based compensation for agents.
Compass has been very generous in their support of agents nationwide, and management is finding ways to effectively scale it back a bit. For example, they won’t be offering stocks as a recruiting tool any more. But we, the existing agents, aren’t affected by recruitment, and we’d be fine if they didn’t hire another agent! So while the stock may get battered, the agents are doing well.
I’ve mentioned that our annual contract is up in July. There was a time when we discussed Kayla joining Compass in NYC, and during that discussion our CEO offered us a 2-year contract. I brought it up again last month, and he agreed to it. We signed a two-year extension a couple of weeks ago – we are happy here!
Here are the Compass internal comments about the earnings call:
The Q2 Earnings call revealed important insights into COMPASS that I wanted to break down today with some of my context. Firstly, the GREAT news:
$76.8 BILLION
The total sales volume for Q2, April, May and June, 2022. That’s about flat compared to 2021. (For context, Douglas Elliman sales volume dipped almost 10% in the same period)
66,846
The number of total transactions in just 3 months in Q2….up 2% year-over-year.
734
The number of transactions COMPASS agents did per day around the USA, 7 days a week. (WOW, Bravo!!)
$2.02 BILLION
The number for company revenue – in one quarter – UP 4% compared to 2021, and the highest ever in company history.
10%
The decline in transactions in the US overall in Q2..while COMPASS transactions rose 2%!
4.6%
Yes, that is COMPASS’ national US market share now, up from 4.1% in 2021. (Q2)
71
The number of markets COMPASS is in now, compared to 62 a year ago…..up 14.5%. That’s a lot of investing, not spending.
$900 million
The total invested in COMPASS tools, services, software and technology.
400
The number of principal agents that joined COMPASS in just one quarter. WELCOME to COMPASS!
500-plus
The number of super-luxury $5 million-plus exclusive listings represented by COMPASS agents in just 10 of the markets we are in. COMPASS sells luxury…..LOTS of it!
LOSSES:
Of the $101 million loss that was reported, $59 million was stock based compensation for employees and agents. Therefore the cash loss is far less than reported.
CASH
At the end of Q2 we had over $430M in cash, and over $300M in untapped credit and virtually no debt…….that is more cash than any other publicly traded brokerage. Compare this to (as of end Q2):
- ANYWHERE (Coldwell Banker, Century 21, Corcoran, Better Homes and Gardens, Sothebys, etc) has about $ 262 million in cash
- EXP has about $241 million in cash
- Douglas Elliman has about $ 209 million in cash.
DEBT
COMPASS has virtually ZERO long term debt. Compare this to:
- ANYWHERE has about $2.5 billion in debt as of end Q2.
- EXP has about $2.7 billion in debt as of end Q2.
- Douglas Elliman has about $164 million in debt as of end Q2.
- Redfin has about $1.24 billion in debt.
Agent Support
No cuts will be made to the quality of Agent Support: all financial measures to improve efficiencies and profitability will not impact the quality of service for agents at all…..while not in hyper-growth mode, resources will be focused on supporting current, active agents fully.
COMPASS faces many challenges over the next few months as the real estate markets navigate a new phase driven mostly by sharply higher rates and the impact of inflation on consumer’s affordability. While our financials are strong, the real strength of the company lies in its people – YOU! Never in all my life have I seen a more tenacious, hard-working, professional, creative, entrepreneurial, kind, empathetic and brilliant group of people who comprise the COMPASS family from coast-to-coast…..all the way to Hawaii, and in that lies the certainty that we will weather current – and potential future – storms, and SOAR to new heights when the markets turn as the consumer is drawn to the best in the business.
Apparently, Corporate Landlord’ing is hot! Too bad for the renters…
https://www.axios.com/2022/08/16/adam-neumann-flow-nashville-atlanta-miami-wework
What’s your take?
It will keep the pressure on renters to find a home to purchase.
The new players aren’t getting any deals either – they just pay today’s retail value and hold long-term. It provides a great floor for the market in general.
On their way to get married, a young Catholic couple were involved in a fatal car accident. The couple found themselves sitting outside the Pearly Gates waiting for St. Peter to process them into Heaven.
While waiting they began to wonder; Could they possibly get married in Heaven?
When St. Peter arrived they asked him if they could get married in Heaven.
St. Peter said, “I don’t know. This is the first time anyone has asked. Let me go find out,” and he left.
The couple sat and waited for an answer…. for a couple of months.
While they waited, they discussed the pros and cons. If they were allowed to get married in Heaven, should they get married, what with the eternal aspect of it all? What if it doesn’t work? Are we stuck in Heaven together forever?
Another month passed. St. Peter finally returned, looking somewhat bedraggled.
“Yes,” he informed the couple, “You can get married in Heaven.”
“Great!” said the couple. “But we were just wondering; what if things don’t work out? Could we also get a divorce in Heaven?”
St. Peter, red-faced with anger, slammed his clipboard on the ground.
“What’s wrong?” asked the frightened couple.
“OH, COME ON!!!” St. Peter shouted. “It took me 3 months to find a priest up here! Do you have ANY idea how long it’ll take to find a lawyer?”
what is the plan for all that cash?
Just wait until they need a Realtor®.
what is the plan for all that cash?
Just sit on it and hope you don’t need it, like most people? I’d layoff half the staff and spend all the savings on recruitment, if I was them.