Compass (COMP) 7 Aug 232023 Q2 Earnings call transcript

Good day, everyone, and welcome to the Compass Second Quarter 2023 Earnings Call.

I would now like to turn the conference over to Richard Simonelli, VP of Investor Relations. Please go ahead.

Thank you, operator, and we appreciate your time today, folks. Good afternoon, and thank you for joining the Compass second quarter 2023 earnings call.

Officer. be Greg our Officer; Hart, Reelitz, Chief will Executive and and today our and Officer; our Financial us Robert Founder Reffkin, Chief Kalani Joining Chief Operating

refer In to discussing performance, our we some measures. company's non-GAAP will

non-GAAP Relations You most to website. our quarter directly of posted release in the XXXX measures measures earnings can GAAP on reconciliation find second the these comparable our Investor

statements statements expectations, risks comments make expenses forward-looking year that our These forecasts and for as levels assumptions will on full current cash as are and the We our related for our operational involve and and uncertainties. and operating third expectations include guidance based achievements. flow well to quarter our and XXXX

Our may actual results statements. differ these materially from

uncertainties risks, Relations and our SEC quarterly with about information and other results that reports filed also affect Form more Investor find recent on on can most website. XX-K could on the available report our annual on and XX-Q factors Form You our

undue place XXXX. We forward-looking is to time X, August not this statements, at based disclaim upon should any today information. in information reliance update expressly obligation presentation You all our and any this on

the Robert Reffkin. over now call Robert? I'll turn to

thank quarter Rich, you us you, our joining second and Thank for results today call. conference for

that basis debt of midst the market quarter points strengthening share and I'm our in resulting unexpected and the was share, and increasing grew cash grew quarter, We in standoff agent by X% trauma that in guidance ceiling pleased a with flow line we position. to strong count free positive Congress. to margin, second the grew mortgage results impacted financial in rates XXX from cash market while achieved delivering

business and still approach take expenses operating efficiently agents, growth. in will disciplined our a run to to and platform We while our investing continue our

such Tracker, Escrow. launch Performance continue GPT into one-click and and products as Compass integration Title our platform, We to new

our team next workflow over buyers transaction client both agent we before, expect out rolling teams client's become the launch during And and the destination quarters. functionality home to year, the after time single next will everything sellers. We two will for portal, and be more for over for which

a closed, principal than retention. Every half of lost on seeing month was agents number of are in month first yet we year, the positive continue we before. July, the value looks less believe We landscape where trend in is the and the while agent trend competitive by to being this fundamental not driven proposition trend, the competitors relative the Compass strengthening. the to is changes

weakened differentiator can shift model will There tools been in best the structurally for industry and a best agents, to is the their in The grow so brokerage they critical key Compass Compass. is providing focused on a businesses. and competition happening services business be always resulting that and has always

value-added investments seeing for already less services, reducing support significantly these with are brokerages the now than competed areas, historically provided. agents in Compass many that part, which, was much what for We traditional and most

free cash in a We debt worsening for is believe VC-backed funding doesn't agent market combination flow factors driven rising market. Compass by the and, increases face, specifically departures, of share and companies, declining in facing any VC service pullback competitors that costs, this margin, some

are market, many of invest As to about estate billion platform shift period it $X.X In catch come million over R&D technology we over very pandemic year, the were up with an equity R&D. approximately our makes continue a have challenging which including example, in boom, that competitors the significant in and competitors investing compensation, seeing XX-year we in real meaningful to invested a in to $XXX in But the peak for a not fruition. way. the talking dollars

a attempt is positive seeing incentives, competitors race agents; were we're reduce the using for competitors on to two, in trends they pressure financial recruit one, two current The resulting Compass: Compass to to the many traditional services, in-person tech. value example, culture, environment of training, to out attempts competed brokerages coaching, third-party where support office on staff, and that for integrate historically support bottom

cases, We crowded on brokerage seeing are landscape, themselves low-cost, adding many are amounts lowest areas, amounts. them is possible lowest providing these a them by low-value to and now agents and the already in service cut defined model possible back that the the charging

Quite simply, direction. Compass is going the other

tools services much with to It advantages, to investing for are We not culture agents, and any in as as more surprise universally Compass would me our national space competitive company. to to the products value our other known the and and capitalizing for see years becoming on creating for than in-person high-value strengthening major widen less high-value in agents heavily come, the crowded. tangible and competing serve only downturn the brokerage brokerage technology is agents

quarter highlights. financial important results a that are is of cost here and working. in demonstrate our In throughout of stance expense Our a discipline aggressive some results, Kalani operating and but second continued reset XXXX XXXX into discuss details will the our levels moment,

makes second in the in million. We completely of goal adjusted free deficit company million quarter commitment $XX in XXXX. equivalents. be flow. This cash cash with $XX free delivered our of flow adjusted cash free second and all of being positive of ended cash flow positive second with of quarter up million generated the EBITDA We $XXX cash the and our almost us free our of positions history to for first with for to EBITDA flow cash best on quarter We quarter achieve

facility our in to ability cash improvement $XXX revolving July. Given free outlook, the operating ongoing flow and strong cash expenses credit draw we repaid free positive flow, in generate our million on

have exception $XXX debt. our on footing solid Compass successful used the extremely we very fund no million of with The program, Concierge corporate With today. liquidity over is to business $XX of million the

improved share. in For the quarter third a row, we market

rate did increase rate we want $XXX in improved to last Our QX, $X.X billion annualized we run it. the we I emphasize XX basis flow a $XXX million, market share last from we would quarters. over did now cash by million of on of XX We operating would that be points have and an we We said basis X.X%, said three is months. to positive cut the over successfully it. run an OpEx in free expenses

are and are We growth the still investing and we very in platform. strong,

are We normalizes. come when for the will the market that upturn when excellently ensure we OpEx our market cyclical to that the And not. positioned work returns, will does

maintain XXXX well. at to million at are Specifically, outlined we focused a million in OpEx we XXXX $XXX in that and XXXX our have on and a exit as expect to run OpEx rate committed to level $XXX are path maintaining

market to of our business, ensures discipline, the proprietary the in will improves and the in growth only believe advantage flow long end-to-end continue the industry. upon that confident company When substantial are in operating the retaining ongoing agents well platform the future, competitive we future term. cash positioned invest this the We approach over to to and growing be with building technology enabling for free agents while generate us our

that have the of has allowed first We incredible thanking continue and team and control excited flow by our to and times positive confidence free in we end achieve what success. want be strong dedication to the through about these diligent XXXX. to a can for remain cash future, with on we to desire the I difficult I the entire it laser-focused in remain foundation us half make Their incredibly Compass of future XXXX in agents. employees

Greg. I'll now turn over it to

Thank you, Robert.

best, industry. connected most supported has Compass We believe experienced agents the and in the

a quarter. to market a Compass the inventory allowing consecutive continue in for third our been competitors tight they growing have As to result, able share environment, capitalize outperform to by

to over the the just transactions processed year we quarter, decline residential of XX% second estate XX,XXX second the market decline the by XX% in the Realtors. of Association in a from In compares transactions, reported National which for as favorably entire a quarter real ago,

up agents QX the NAR declining up basis and XX XXXX, QX peak industry, by XXXX from market for XXXX. many its was left Although have basis our versus points QX XX since share membership XXXX in points evidenced October as X.XX%,

our we us incentives platform equity the number agent count vast Our growth for continue cash reason their having Compass The majority grow increasing of is we to eliminated success, team principal is Compass. since tell and agents coming to summer. last sign-on one and

principal from and X% agents, QX agents our increased up number to acceleration year-over-year average For of XXXX, an QX. XX,XXX principal

Compass We than win brokerages are the agents call of our platform, technology primary returning culture to referrals reasons backs, caliber more and our to from also these and these in other our QX. the it We the agents and cite Compass saw for drives. network agent returning

rates. These factors retention our to Compass staying agents agent higher at are contribute also at as strong

have of we agents terms of and For during second most the agents high XX% left Compass, market industry maintain agents have over agents as this And from count come some quarter the decided volume, are who with has continue of levels gross both to of productive retention of prolonged XXXX. downturn. in entirely attrition transaction when transaction annualized leave QX, less this in retention to principal

we will to pursuing cash and forward, our via our equity to approach deal opportunistic that adding Going continue agent minimum allow in upfront structures while to M&A, base limit selective to utilize us dilution. be

the translates so of make agents the and this monitor the productive invest to better. us Compass platform of our the to continue are We a and is addition they primary we are by their agents platform, proud We helps more that for team the recently to majority leaders be Performance business performance. tell and that to them Tracker, that doing fact how to platform of coming activity integrated reasons released one better that Compass powerful to to allowing

that made, but achieve monitor dashboard activity to targets texts production like use set e-mails simple-to-use calls their them This insights efficient goals. to for They more create enables and help decisions actions placed performance. and can to action comprehensive data-driven then more sent goals in those helps agents improve intentional agents take This and activity one to and business to make track place.

the other tools for Like is accuracy Performance and increases platform, our the tools on the production. efficiency of fully to with pay by or third-party data within manually for their eliminating the rest platform, agents need integrated redundant which enter Tracker

been is and as increasing Southern after our integration the attach half launch Compass of Title Title in and business first platform generating rates adjusted business positive and of XXXX the has internal California. outpacing successful our EBITDA targets in Escrow throughout Our Escrow the

Southern originated since rate. XX% opened and California. an of acceleration in in attach T&E a Chartwell entities Compass attach contributing QX. our California orders on on and our March has platform, XX% platform. integration At in users Southern transactions resulting the Chartwell their to two new in originated increased platform users, our Chartwell's in Title, the At rate the delivered rate attach is that Consumer increase in Compass and highest significant launching, of record on Escrow, Escrow Title, the driving Since repeat Compass platform at launch, And resulting in Consumer

integration platform Compass We accelerate accretion to our T&E to continue on coverage strategically portfolio. expanding market our by the focus margin for driven

We D.C., Title Philadelphia, Escrow and Maryland end of in expect add by to the integrations the Washington, Virginia year. and

to and The and save AI accomplish results, time achieve platform both them built business to help better Compass to agents' is objectives. help we our leverage

our technology-enabled investments our leading This from benefiting new in brokerage brokerage in the a of a artificial As the the us. agents isn't number have years. been number area for and one for U.S., intelligence

on We outreach we've As I marketing through our the directly XXXX beta since time creating generation ChatGPT-X Compass tools call, as homes, our sell such help collateral QX with to our clients. platform features capabilities leveraging been search our tasks and in platform likely of studio. our the OpenAI's and to listing mentioned video substantial suggestions, like agents launched similar writing save automating recommendations, AI CMA our across descriptions, recently integration with for into

tremendous seen months. to all these have to our interest positive roll response very beta. We our technology capabilities have the agents and over from agents coming our in We're out this excited to had

We nature, because its believe enhance. on AI outsized that and intelligence drive all AI integrated we'll our return platform tools on can depends see artificial of our data build to an upon that investments performance. its By

models. as can data our This, improve platform models. is benefit Our the in see don't that more more to the touch which where offer agents cycle. more us tools machine our those in platform platform to and points end-to-end performance virtuous help agents unique won't use of machine learning drives the generates we Brokerages apply provides this their learning data from more enhance delivers better an agents to turn, usage then results, improve this Compass integrated regard.

been million in seen Compass referral global We've to Realty. International affluent country June, a enable luxury strong with in launched listings from the This our monthly and affiliate $XX In already a rental. will referral interest $XX,XXX BARNES a from global agents agents of we have across made, ranging of program to dozens this place front referrals program audience. a

the has proud am the major of we've a over I strides XX in past challenging in Compass market of very months. been what transformation taken the

Our the industry, they the and that brokerage why the our is demonstrate number in to agents which one in the employees are continue best country. Compass is

our now Reelitz. will it Kalani I turn CFO, over to

Greg. Thanks,

detail, Today, on I will in results financial I'll third for our quarter. guidance and review expectations update our then more provide second an the quarter

We the of this housing with midst continue low and perform market. discipline to in focus historical

to controlling on be we control, what and retain attract our the cost continue our agents. focused ability and can namely best to We base

base market. strong As despite extremely this strong adjusted QX resulted the focus cost our in the of results flow EBITDA controlling generation show, and challenging free on our cash

operating For a the fourth quarter reduce our in expenses. we continue to row,

financial our detailed to Turning results.

period, $X.XX of billion prior-year second billion $X.X revenue within a $X.X XX% of This falling to $X revenue to billion. range guidance was the Our quarter representing reduction in compares billion, our lower as rates put we in pressure continued expectations May. mortgage came since Revenue we in our from year-over-year. back of guidance on in the out time our end saw increases the

value decrease of a in transaction as XX% a price selling total about as average $XX.X from the in XX% second decline a ago, a of transactions billion year reflecting reduction Gross X%. quarter, was well in

improved commission the to of year Agent QX basis from of when non-GAAP last XX.XX% as expense Program excluding period. revenue Our a percent impact approximately on by XX of year-ago the Equity points the

of for exchange in the of QX reminder, Page Agent prior-year commission investor Program's XX we on the which on portion a impact additional the agents our allowed Equity deck line details offered As Program, the includes was periods. equity. cash the Agent Equity XXXX year commission last their to a the

anniversary until this Agent to we of XXXX Equity You will the continue sunset see each differential in through in QX the Program quarter XXXX.

operating quarter million commissions, Our or $XXX non-GAAP were $XXX for excluding the an million annualized basis. total expense, on second

to noncommission-based expenses with we from line as in somewhat about revenue. quarter-to-quarter are and talked varying As our of previously, fixed nature opposed have sequentially operating increased many historically in

for annualized due to cost reduction On year reduction the in past basis, million the from $XXX over initiatives same second reflects quarter our our year. year, quarter of just ago. $XXX quarter an the last the compared a OpEx this OpEx of of million to of However, second over implemented the a $X.X $XXX billion reduction million one reflects

operating operating on focused new team disciplined Robert focused our and us as we discipline to expenses. mentioned, allows that remains our cost base. sustain management And Our are on maintaining our

development point, the excludes and a XX from to Page adjusted and included QX excluded amounts. that non-GAAP reconcile and expenses As EBITDA. reference operating expenses and deck are that the expense refer operations stock-based research we investor XX marketing, include sales and these G&A, tables and expense We've our on categories compensation support, in and other of

$XX.X EBITDA quarter was adjusted the Our for second million.

effect within market resulting was flow-through While our it challenging low the second adjusted to the of quarter our range, revenue the guidance to end primarily conditions, at negatively impacted our due which and expectations, EBITDA.

the $XXX quarter $XX same loss in compared a of compensation year in million was $XX for expense of are quarter GAAP loss the charges, net the ago. which the to net of $XX a stock-based GAAP million loss for expense. Included depreciation and million amortization million and Our period non-cash non-cash include second

to Additionally, incurred we charge second the of a $XX related quarter, improvements. efficiency million continued during restructuring

slowing and flow new in calendar flow ago, intentional quarter and compares which year the by positive improvements cycles negative during and the new our the changes and In the capital in to timing to the quarter Cash expansion be our primarily the were lower of million, other expenditures quarter-end. compared clients of offices. a flow $XX.X to driven cash markets particular, EBITDA, year our million to $X.X cost capital. our cash the favorably the in agents and was expenditures [indiscernible] Free timing free and can relation current $XX.X $XX.X by from driven payroll working impacted adjusted capital second a of cash million by a million of of in collections vendors payments to cash just favorable ago,

our and And cash our on our as balance the was of during $XXX million on We of outstanding therefore, equivalents June XX, the million. $XX sheet cash balance payback revolver June, of reflects end quarter. $XXX at of revolver had of the which million the

Given flow July interest on market to relative our the cash continued during strong balance the and in made revolver stability second costs. repay in this million our quarter, of we the $XXX remaining decision to outstanding save the of

to on liquidity credit to continued $XXX are facility, market over positioned believe we react to million our capacity and balance the access the We revolving well challenges. and have therefore, sheet cash our of to we on

turning guidance. to financial our Now

the operating for of half performance expense discipline results our first improvement. that XXXX meaningful Our confirmed creates

QX, the trends market while some forward to As also additional we market. seen signals in mixed look we improved, to we've have And continue see risks.

XXXX, we expect billion, adjusted $XX of positive $X.X of million. million range EBITDA billion For QX to of to revenue $XX and the $X.X in

a agent sales to impact be we We the declines largest market by new will additions similar our drag, lift first record year. revenue experienced from net do year, and the over mix from however, particularly offset of in half, is last which California, anticipate this expect last the

expectations schedule flow on to assuming third for be free flow quarter, continued again year. we in cost are free the full year, positive given our the for transactions to on discipline, in line we Importantly, the stay positive cash remain be with cash schedule industry

million in our operating the full be year Additionally, of we expenses range non-GAAP are $XXX million. to for reaffirming our to expectations $XXX

this rate midpoint a on year-end. run at be of to range expect basis by We the

QX, through commitment our is to commitment year, to continued directly our over revenue. to working For results year that And results. cost control our our remainder us declining and about clear beyond. strong the expect cost reduce the our that is commitment our we and proven to have to results the in commitment we've base to spoken EBITDA solid last and drive cost favorable led despite adjusted control It of

results While the again as all you members we with discipline date, we excited expense of to team cost operating levels Thank maintain for we over our today for and the are do next our more are years. to agents to you committed even our couple Compass.

like Q&A. call to the now turn operator the would begin to over to I

[Operator Instructions] Needham. McTernan with We'll our from question Bernie take first

what market your thoughts get growth? of you to Great. Thank we'd the questions. to industry when start, XQ? And in broader just you estate to think for the the year-over-year real to taking terms guidance Maybe in contemplates get love positive back the can

Yes.

In terms see of rates buyers We a sellers. see the at X% these new accepted overall continue more to as market, normal. we mortgage buyers and have

I there's to seeing and before. this we're the cash have when evidence think And increased relative prices more all more buyers every in month -- offers the the that sellers, year month around places like it's all is Manhattan XX% around course, That XX%. the inventory. of offers country, In which know, said, XX%, is there is not are of historically as enough you cash.

believe still past, XX% XX%. in pace sales shared approximately would that year given we the be the down market XX% this to more the down market of I'd towards to so, And and that the to the XX%, say, the at will inventory over course liked. And now we have the coming we than XX%

in and of third terms for you of -- the thinking remainder some early about towards Robert. meaningful your get Thanks, guys had on commentary. end some of how then But quarter. just provided Helpful agent year? the guys to retention, Understood. gross just quarter agent agent acquisition churn. like adds are you you comments commentary seems It the And second helpful the on love

of and ever continue manager. I remarks, productive to hope team's We that we we've growth of one the some of encouraged in was momentum. the really recruited second of most strategic that quarters that. agents in positive we It the did we've per see quarter. performance terms been seen our in number scripted Yes. principal sort my by And referenced recruiter,

up for is not challenge just to team but continue at the over to And how that to take so that the time. level,

ever but terms the provided have In we challenge even that we've go-forward and use that's basis, continue, for on definitely we expect a trying team. be net we're formal trends to a adds and formal agent more to agent forecast we've positive, for the seen adds, set haven't them the of and a net to don't

Kalani. And maybe one for Great. last

about for You we XXXX. seasonality? As seasonality, think OpEx there be said, OpEx sharpening pencils should we're our

divided rate are run hit taking guys by we able seasonality million -- is quarterly Or be account? of some we the to should just year, you by to the should just OpEx be to $XXX the end If million expect there four? in $XXX

question. the for Thanks Yes.

We business versus, move that line quarter that kind say, sequentially variable kind of are revenue. in of with a by

we So some be I would it, the same relatively expect, of amount keep to aspects Bernie, overall, should but seasonality there'd small OpEx.

think a higher of and to I There especially year take, materially, same. we line But with it quarter. straight be kind versus variable as QX should give in with be kind a So overall, more of a revenue. the revenue the look might of tend a through some line

Understood. Thank you all.

take We'll from BTIG. our Bhonsle question next with Soham

maybe, Hey, I the question. on the Kalani, for for good taking in a dive little in underlying bit guide evening, assumptions XQ. to Thanks wanted the everyone.

midpoint, then $XX I looks the take million, on of next XQ. OpEx there $X.XX ASP fair range that year-over-year you're share that quarter the $XXX EBITDA, million a midpoint So assuming is on similar like of basis? non-GAAP And the by would guess, to to flattish your it market assuming sort sort take, say it and it billion

run rate So, XQ? by does go that that mean that maybe million below $XXX potential to there's

I'll last sure. Yes, the answer one.

think of are I as $XXX at -- and million. million we're to today where move we $XXX down we kind continue to that we annualized mentioned, from

are we hard. think I overall, working

actioned already. As we've always of identified have the get to $XXX said, to majority the and been actions million

about timing those it's coming and vendor And up. timing, of think contracts so I

will glide fourth quarter into run I the think kind of we rate.

and to to for to more opportunities We look efficient. on cost opportunities be for continue look continue

right And the where right So million I end QX expense level of the now. I our guide we of we'll But that's keep think working are at $XXX us. right right for operating is think there. that at

things competitive thanks for discount-based I word color a one you earlier. service on full But for environment. or cloud-based are Because maybe of that from can you the bifurcate I But recruiting, because the their of ground. models they then, keep wondering might some sort seeing hearing other wanted is be could just what to versus And models? of of their hear you just you're what guess, just seeing today. the to on these Okay. on agents we're moving cloud-based more split models the

Yes.

what seeing say charge ground, at there's, discount one lightly. that and on it side, nothing we're extreme, brokerages So on the give to very little

hand, On massively XX%? lot in charged that. this support you competed me and back, brokerages that on their the of other Why latter what the there's training, an And trying them then And retaining the have coaching, are best reducing is you value-added office. brokerages seeing and agents hiring not the them have agent more. that more next culture, services, even they've, off provided technology in back pay offices, historically that I'm don't pulling charging of historically on, coming in environment, to a XX%, the and closing I'm to saying, integrating supports. year going "Hold group

discount going you me less." to So, unless I am to go the charge brokerage

the as it. And so you downwards competitors model traditional with some spiral foreseeing kind a discount towards moving this it's of brokerage of coined

would of the have to best do want what that think to to what have And discount for they game. in. -- so Compass' want And people out that's want are do And because there. to fits it. people at are at so the best been them all existence. zero-sum it's where best agents a they many the generally do help speaking, that yes, be there's a really I brokerages at Compass that there's brokerage, top But There discount only

you. Great. Thank

from next We'll Oppenheimer. question Jason Helfstein with take our

Thanks.

Just coming closer lower first lower later in the it why industry end for guide you midpoint. thought about Was of the versus or than revenue in the is trends weakened or Kalani. Maybe share combinations? the talk quarter, to the

mean, then second think guys about How question, at last I but some like point share, maybe, here? your gaining for do we continuing thinking then less And we've strategy Is to year? -- share. albeit focus Thanks. levels you're of kind year. Robert, maybe seen from acceleration you last on share than than -- expansion of kind about And are more similar there how an to just market just

Yes.

I X%. combinations the with as rates provide to guide QX, X%, definitely that market change or our driver of trend -- I not revenue And standoff was ceiling estate was was it the was So mortgage unexpectedly of to And going in well think for showdown as that unexpected. market. the think up, mortgage real debt rates we share when then the were ended close primary the the where

Yes. And question? the want second do maybe, you to Kalani, answer

question can Yes. Jason, I you right. it sure second Sure, just repeat make the to heard

you look and transaction GMV you like you Do of we continuing the at obviously, one gains share to at look either are but saw I then share, of mean you're or I that you're the on much less gross market is than seeing I last basically, volume, guys, gains last Yes. looking that think mean a that investors we if year basis. value. trying share are of year, more kind of the But like that look can this accelerate kind saw of gains And share that you how a expansion? year? levels think at year-over-year to that function

part the don't first Greg, that, Greg. of I'll take let -- you why

the you're right think I one.

Yes.

reflected strength the that substantially year, So question, quarters we California, very our about towards first two our for Jason. in market share California, our over and think despite to way share I because but California that. quarters two impacted we share has if it's the everybody in the been have a The think of that heavily business you moderated, about last were industry last the weighted gains is year. And to last gain that over relative the continue great

market would particularly expect and over current that So market the rather stay just recovers as I than over you'll see California the our that gains recovers, levels. increase hopefully time, at share time,

agents And our their caliber among share of to their share our in their drivers: is the all to are of agents markets. grow along their markets. ability one, from outperforming agent of our with market their typically two to perspective. our huge platform outperform The primary through continuing a us continue our believe agents two, and the competitors, a best big grow fact for driver we a asset agents We that competitors is in count;

Any thoughts market about expansion?

Yes.

I the we're of the example expansion, and geos. submarket markets any within Area those be an we'll but expansion, further investments. In past. in more Bay that in moving major market are new expanding terms of we of we more would had expansions than our been to market wouldn't And expect [indiscernible] see new into And

you. Thank

We'll Bouley next from take with Barclays. our question Matthew

Good how split, that as everything Thanks up a as the competitive just seasonally. is taking percentage of Thank for on commission expense the think you're the of metric given the normal obviously I It's $XX.X which you've commission a peak down on sneaking you. afternoon, kind been Maybe million maybe non-GAAP the side? to, that you going Or think alluding forward, sequentially, do seeing questions. year-over-year, split year? everyone. revenue. little what the Is bit for about trending

Yes. it's Hey, Matthew, Kalani.

believe non-comparable roughly XX our of Absent split to basis that expected two commission the it's and absent Agent that, reconciliation. the quarter of last Equity XX provides I by drag. right? basis I it driven Equity market quarters, we continue. the over Slide be our our XX share kind over Program, deck points. decrease to XX increased have Just the -- So XXXX, includes Agent trend Program, primarily will between in point an of clear,

say I a drag XX the see margin the math. apples-to-apples, that XX accretion or we kind from Program, can basis so of that would and can AEP, But for this at be do on Agent commissions, should to basis year. year you the point You Equity last quarterly on

your competitors extent Got could at pack All the is, right. it. level actually of do question of access my little sort And that all worried And of of a secondly, Great you topic that? of at could to for Thank start. of then Kalani. really some kind the playing the I Are have high some Compass' of head ahead AI. generative level the to you bit? guess on around you how top super the stay field that some that color

for have platforms. their don't actually Well, the competitors, own our most part,

use are licensed So the diaspora tools third-party their across to be spread agents going software. of that a

of each improve might not they leverage all into one integrated vendors those to while it's so, platform. And AI do, individual what

app. could use they copy something to for paste an So, the then get agent their part marketing into the AI of at is one to limited If of benefit that want to it, do that put they business, have take. place. in it, another to it But

of And in is so place. it's platform our all together the one benefit

information MLS that so, description as we've an that the example, have. can for the a you integration And with all description. pulling is listing from done The listing the Compass, we ChatGPT-X in create data

to listing of do in for way market. clients job agent perfect. to the provide XX% where get to to on directly value It their because the and better. not. we the touches absolutely their They The but my time metadata then ask agents?" present who better and disintermediate that agents the they'd of leveraging on have And And the other final to is, is talked customers. is it all one ones of sometimes They be that save at we've want with it's reflect they leverage don't So, descriptions "Will to they put AI do. they do about truly that people it the in. second. pulling that you get their the themselves brand one way and perspective the that have agents will able can The you, disenfranchise questions the our best don't will what better Listing focus will AI job make it and they or

increase is more AI of like others. brokerage versus my the seen the that will likely So, actually $XXX million has differentiation belief sell. other anything that It's than that years. Compass offers revenue was likely to No sell. to incremental two in last generated We've

scores the daily CRM amazingly our higher going on that next And to to had positive the contact the clients that believe we've on year. past has we market because should likelihood from home a agents, in there. they because recommends model that able out The reach responses are a of agents. in get only to basis. and then You agents all create information using AI-driven an benefit our of that We're is that,

my actually differentiation So time. perspective over our competitive is increase it will

everybody. Greg. Thanks, It's Good great luck, color.

Matthew. Thanks,

Matthew take next We'll question Stanley. Morgan our with from Cost

Hi, two. the I have questions. Thanks everybody. for taking

a Just some that about building distinguish execution the beginning key the from starting launching you guess, do that? competitors can of with your to the of commentary offering think call and hurdles at the consumer-facing through next I year. portal you talk will what

end measurable the Thank on And a see driving you T&E then, coming of the then, secondly, impact, company expansion you. you 'XX of California, business mentioned in Do more a Southern year, markets the not couple this by of at if level? the that year. outside the margin just

the please portal how feel -- free on take add, start and you T&E, it about away. Greg, to or client on then Kalani, I'll either about and How Greg

I agents portal, client every come one that to reviewing. agent a -- Compass, is to tool agent a of listings with The the an one number portfolio reason back I've say works thing number the ask On them heard that when they're which collaborative why the on my Compass, comes is, collections, buyer that where clients back them miss why.

price real have status time. You changes

e-mail not in for you have You there in are client. perpetuity. whoever to the the all three with look updates don't in with but comments all -- and have searching people It's client just your or people e-mails client, there the two there

the when see I'm to So resolve client. I -- leaves, now not this clients and my forth are entire their don't by back e-mail price when message. have or I -- an -- history, and I restart to whoa can't as a status as text there's That change. have search, I happy like, go a agent

we client and And agent can't so, agents, e-mail only, background, just tools by with share agent was the vast with And more the client. the sheets on built for and second will client. It's and -- we've client tour working agent the message view hidden majority the are the actually is see. the the where it by text

can get place in all And with so everything their their client, for how agent place, single does a is, to send them goal things home. they everything you an that live the

CMA. -- way, So have To see static, be single it examples it that called would sends the it's in it in and go that We the already a again, place valuation to live agent. digital it can single doesn't a CMA, seller, back have with updated, to the a but sits for see. they client a

the listing. for different digital seller ads, sites insights all many for -- all the the ads, for would you as my all example listing sites these Instagram ads, on Google hits Another digital a are ads, on aggregator Facebook well whether how marketing, as be major Compass, getting

have We one they But clients tools. all only again, to at time. the get sent a those

the for line in place, And Title and one already all it's we've in it taking is buyers, and place. files, It e-signature collections form with just transaction again, more. single the and into built so live and a the for agent letting process And stuff what the and then is. the Escrow the extending time negotiation the moving beyond,

services, into the time, during sellers portal warranty, benefit. just buyers and goal go more build the title, monetization mortgage client portal will is and home adjacent so not but it after more to related over home home cetera, us client security, And insurance, that help transaction. the And et create to the before,

that think value they're transaction, can portal addition as buying just do providing in client maybe things an key of build, And they're Robert, to Great. a working with slightly, one to the client on agent the whether the we that in or that home who after on transaction way they provide and of also is Compass them own to the reinforces the that the a always but value transaction. with their selling value that that in a client the to assisted time agent home, to

dates, actually about integration, obviously, Title are owns and lot created. want because a et dates track, portal that next you parts respect a need be them, that to to and that get interesting to Escrow with you'd and cetera. have all thing client repository is Escrow who have things, documents, but step to the but There's that for all of the transactions. the of documents We an also Escrow and integration happens and And try the you tracking those so, to to stuff have of Title Title talk important that on

of the them, to open is season, So always a that we've done tax within in always they've parties, And platform the obviously, just that third business or after now up other of is area for But an client goal and secure fashion. clients purchased et sold integration right tracker agent-facing the home. integration. the time cetera, our the can like access pieces over a business have to to

just to So also Escrow and well. that's driving, client attachments that the we're reasons but to opportunity as experience of not incremental continue one Title for improve for the integration, excited the the about the

integrations I'll time. that, pass a the to see over it With what might from to Kalani we speak to impact perspective and margin

the I it side of are Thanks, about Matthew, we think it, financial finish Yes. our Greg. excited just to services. And think off, adjacent I from

us to All favorable and very services margins adjacent come of our our with to run rate.

continue dollars and see. are to the a what start beyond to it more adjacent where years, see is and today, as spread few percent two think total our say, to grow three over our we start to next of meaningful you'll I should you years expect we services become then you'll

think you help next I to expect for years margin So add accretion. the and over some should it few to start

Great. Thank you.

next take from Ryan We'll with our question Zelman. McKeveny

you EBITDA Hey, taking reaching attach the on side, accelerating thank for Southern question. you Also the California. in and adjusted out the positive T&E called

sense. I think Philly, D.C., Maryland makes

more important most you're seeing that's the target high OpEx on does beyond those a that EBITDA already, moment, level, thoughts to there I I SoCal natural attach, know Any the with to a of the think more try feel rollout at like in next. but go you've drive at faster T&E. it good success extension where expansion the got maybe is pretty justify flow and could markets? And cash the footprint contribution a so

picture So want bigger you. puts of more behind maybe how kind forward? and markets quickly going to to you about just Thank us the roadmap ramp talk into takes T&E of

able to title as And over to Colorado as likely In the expect well our will of as well our in be launch the Texas new we year. operation. title year, we integration the course Florida this operation into expand

With have reality, we the trade-offs. OpEx make to

fast as OpEx moving we're as allows. so, And discipline

just California, how of That's gains performing? guess insurance your headlines just the back. seen is any headwind I thoughts just Robert, California? high-level the there on impact obviously pulling all on home around is more despite some I California recognizing seeing helpful. incremental recently good. share that the companies or And guess you're view We've generally any

home the insurance yet. or impact issue seen in haven't an Florida I transactions Yes. on California have

it remember. for as one the probably there's weeks yet. miles most noise Where no sellers. of had California, house And but is haven't is visited x there's will the Of multiple inconsistent just similar market offers. couple which a amount country. just most serious buyers three Time open had away agents what that one of offers that the would seen they and a property I and and the people tell. a property, because In at no describe This it's across really, that's and and transactions course, heard I've maybe more impact issue, but

there's -- opportunity now. buyer agents agent market In part the market for And -- that it's And or generally where seller story opportunity an so said, it's or they're yes, creative. gain a there any is really right best no if consistent share. market there where

best ride out the And market and to on focused agents they're company so that gain going we're been thankful share through to that we're it. be this because will a continue has storm and historically

you Thank much. very it. Got

Ng Mike Goldman take our from question We'll next with Sachs.

encouraging Hey, $XXX just questions. see of it for initiatives the question. was to XXXX. maintain good afternoon. I million and Kalani, two and the OpEx in XXXX Thank related have you cost Robert, to commitment

talk but macro assumption that and free dependent, respond Thank And if your if or where could positive cut of Are that the competition? I to can to cash areas there $XXX be OpEx. other I wondering flow level as confidence also inflation 'XX about in current bit continue needed appreciate just flow you 'XX? it you was free to little then in second, is First, million the fund can outlook you. a cash will

Mike, Hey, it's Kalani.

start first I one, think. me with Let the

at prior $XXX year we we exiting I've are confident a this on be that We are mentioned million are question. a to going Again, rate. run

to work million. right sure and the we're that to I on And delivering think to the to make actioned much of continue -- to get we've opportunities cost. efficiencies with drive platform importantly, the we've we best focus $XXX on

'XX, as about continue we think think see opportunities like we labor. I to low-cost

just see our continue them the to the to at service transformation operating give opportunity. service a opportunities in of but agents better We way efficiencies that efficient we more

even we around are very continue look offices us. and get similar I continue can how And expenses have so created vendor to we through using energy bring to and see we and make -- see at look look I things to opportunities again, sure at best XXXX, we think, a path low-cost million. occupancy we that to think we in at stay labor, and And 'XX, the that do at $XXX our as to

sometimes that consolidate. to the ability means And

look to continue at those options we'll so overall. And

I fast I million, cost. how think focused about as for which think big what market controlling us we're for to ability And variable gets the there, the I and the year, recovers. be on will our year seeing we is revenue next is at cash you're $XXX next what think flow think stay free

ready I both we've think is million set about, the for a to as the us market it be at stay $XXX talked for level. to opportunistic future, to but also up allows continues us that that

XXXX. are cash flow. our I'm base work to we continue cost and at cost feeling about for really But that drive to continue we'll So to with where good free

Kalani. Great. Thank you,

next from with Lloyd UBS. We'll take our question Walmsley

Thanks. Two questions.

other color with are over-indexed at the First negative, those market the price positive or points California. to price big they're geographically by Can on going what maybe doing? is, what appreciate especially I like you in things the those on or any relative some guys you impact markets where point, business, broader doing that on markets or share color guess, rates

bring front a I moving streams new high-margin in some technology been, great. that that deals exploring And without have then, could just you Anything for there of anything be investment? licensing, would more help lot sort second potential of asset-light one, on you and guys revenue think, could share

Yes.

are the most balance, downside impacted happened of different I'd what's in markets on the the terms up in COVID most In in say moved geographies, being now. the that

the of real last quarter, a impact there. so has the because we debt And presence of that strong We're by obvious market that Virginia one community. impacted ceiling have Maryland, number many in the in far live people D.C., in would very that the potentially reasons, be In terms for a standoff area. the

normalizing, behind at good but and that period us I unfortunate to see And of think was it's time. so that

doing warm aggressive the office. are markets and markets return on not have aggressive still better the I'd say Florida to more low-tax the I'd And doing office people are return on been to that states well. than been enough some of have where say weather

prices speak you that because And with recall prices again, driven come can in that when in to, for it's Amazon it's I people by and it back, see -- demand. the so, But the most recall. are the downtown, brought back and example, Seattle market Downtown, can inconsistent everyone maybe agents I

will lot. when be a that is there there more inventory demand, get is that the just or not X% more And a at lock homeowners of of X% market, And homeowners rates mortgage issue pent-up because the the mortgage mortgage of issue. the XX% are not locked homeowners XX% of at of in XX% buyer lack in, of rates X% below; at below and My level And X% that constrain rate belief our locked biggest a of rates of inventory are below. in or it's at delta in mortgages or brewing is are sustainable in at at X% inventory. X% below; between it's because demand, is locked but lot

of an our that build bring asset-light thing the place In we levels support for the opportunity that and terms service back focused at that historic make our best we our culture of the platform not in time is them we have the give them best of competitors best and this that the be focus. to we're we when thing on agent. in-person agents, front And this our tech always there's and main in main that that licensing period the thing sure keeping that but main making expansion, is us,

so, around focus at a not time. things are this licensing And tech

you. Thank right. All

the conclude And like that CEO, session. the for does you. Robert closing Thank turn remarks. our call back to question-and-answer to I'd over Reffkin,

normalizes. call the joining their you, proving estate we commitment row. to thank to employees thank number all to for And of our real generate as that times, I positioned Yes. that I'm and cash at come well these hard flow. are U.S. flow to one a levels. year in upturn of base of final Compass call. confident how for come Well, the this the the is these cash you. Together, take the Compass Compass can new free real cyclical in market today's we when show The I'm market for work cost second does, agents that the free brokerage for moments and Thank generate when everyone, excited keep want will we making estate will it Compass much back. in the worst

disconnect. you may now and participation, your for you Thank presentation. today's conclude does That you. Thank