Compass improving its bottom line despite continued losses
The brokerage lost $48 million in Q2 — an improvement after substantial losses in Q1 — and the company emphasized its free positive cash flow.
While still in the red, Compass reduced losses in the second quarter and continued to improve its overall financial picture.
The real estate brokerage announced $1.5 billion in revenue in Q2, down 26% compared to a year ago but within the company's guidance forecast. Compass' net loss of $48 million represented a significant improvement from a year ago, when the company suffered $101 million in losses, and an even bigger turnaround from its loss of $150 million in the first quarter of this year.
The company also noted it had a free positive cash flow in the second quarter, meaning it was solely funded by its business operations.
"We have made up most of the free cash flow deficit from Q1 2023, and we believe we are in position to achieve our goal of being free cash flow positive for 2023," said Kalani Reelitz, chief financial officer, in the earnings report.
Key numbers
Revenue: $1.5 billion in the second quarter, down 26% year-over-year, but up from $957 million in the previous quarter.
Cash and cash equivalents: $335 million, which includes $150 million of cash from a draw of revolving credit. The $150 million draw was repaid in July 2023.
Net income/loss: A net loss of $48 million, a significant improvement over both Q1's $150 million loss and the $101 million net loss suffered at this time last year.
Adjusted EBITDA: $30 million in the third quarter, up from $4 million a year ago and a turnaround from a loss of $67 million in the first quarter.
Transactions: Compass agents closed 54,207 transactions in the second quarter, a decline of 19% compared to a year ago. The company noted that transactions for the entire U.S. market were down 21% during the same time period.
Agent count: Average number of Principal Agents was 13,633 for the second quarter, an increase of 429 principal agents from Q2 2022.
Third-quarter outlook: The company expects revenue of $1.3 billion to $1.4 billion and an adjusted EBITDA of $15 million to $35 million.
What Compass had to say
In an earnings call following the release of the second quarter numbers, CEO Robert Reffkin was asked about his perception of the current housing market. He noted that several agents have told him it's "one of the most inconsistent markets they can remember," where one home can sits for three weeks with no offers while a similar property a couple miles away had multiple offers.
"So there is no consistent story right now. And that said, it's an opportunity market where there's an opportunity for any agent, or buyer or seller if they're creative," Reffkin said. "It's a market where the best agents generally gain market share."
Notable moves
The company continues to roll out its end-to-end technology platform for real estate agents, recently expanding its title and escrow business integration to San Diego. The company expects to complete expansions of this platform in Philadelphia, Maryland, Virginia and Washington, D.C., by the end of 2023.
Compass also noted that its national market share was 4.6% in the second quarter, up 13 basis points from the first quarter.
In July, the company announced that Mark A. McLaughlin, who left Compass in Sept. 2021 to pursue consulting opportunities, had returned to the brokerage and would continue in his prior role of chief strategist.