Robert Refkin believes compass and its agents have the ability to continue to grow and succeed in the ever-changing real estate environment.
“In a down market, the best agents and the best brokerages win market share,” Compass CEO Reifkin told investors and analysts on the company’s first-quarter 2024 earnings call Wednesday night. . “We are a company with top agents. “
Compass’ market share increased 26 basis points compared to the same period last year, bringing its total share of home sales to 4.76% in the first quarter of 2024.
In addition to Compass’s market share growth, the company’s annual revenue also grew 10% to $1.05 billion. Executives attributed this to a 7.1% annual increase in the number of transactions completed by Compass agents, to 38,449 transactions worth $40.1 billion.
Despite these gains, Compass still recorded a net loss of $133 million for the quarter. This was an improvement from the $150.2 million net loss reported in the first quarter of 2023. Free cash flow for the quarter was positive at $5.9 million.
Refkin noted that the company expects to remain free cash flow positive through the remainder of 2024.
“We’ve lowered expenses and continued to increase our dealer base and inventory advantage,” Refkin said. “The market will inevitably return when United States Federal Reserve Cut interest rates and we will be able to thrive.
Additionally, Refkin believes Compass will hit its free cash flow positive target even after making the first payment under its commission litigation settlement later this year.
The settlement was naturally a hot topic on Wednesday night’s first-quarter earnings call, but Refkin assured investors and analysts that he didn’t think the settlement or changes within the industry would have much of an impact on Compass.
Revkin’s confidence comes from what he calls “five facts.” First, more buyers will use agents in 2023 than in 2003. Third, Compass agents have increased their training efforts to help them better communicate their value proposition.
In addition, the data comes from real trend shows that the average commission actually increased from 5.1% in 2003 to 5.5% in 2023. national association of realtors The industry has not seen any rapid changes in consumer behavior following the nationwide settlement of commission lawsuits in March.
“Since the NAR settlement was announced on March 15, we have reviewed MLS data from the markets that generate the majority of our revenue,” Refkin said. “We found that over 99% of new listings in March included an offer to pay a buyer’s agent. Additionally, over 96% of all listings included an offer of 2% or higher, and over 67% were willing to pay 2.5% or higher prices. We haven’t heard from agents that those numbers are going down.
In addition to believing in his firm’s ability to handle the changes, Refkin told investors and analysts that he believes the changes in business practices outlined in the NAR settlement will have little impact on professional, full-time attorneys.
He expects consumers will continue to use agents to assist with their real estate transactions, and they will continue to be willing to pay for value, so the role of quality real estate agents will not be replaced. Refkin added that he also believes agents must sell their brokerage’s value proposition to potential clients if they want to get business.
“Compass offers the best value proposition for buyers of any brokerage,” Refkin said. “For example, Compass has access to off-market exclusives through Compass Private Exclusives and Coming Soon, which is particularly important in a low-stock environment.”
Reffkin also sees Compass’ upcoming customer portal as another value-added service for consumers and agents. Through the customer portal, home buyers and sellers will be able to track and view everything their agents do, including preparing comparative market analyses, scheduling showings, coordinating with home inspectors and negotiating with listing agents.
“The problem that this platform solves is that agents are almost too good at what they do. They hide the pain of their clients because they’re trying not to stress them out — there’s a lot going on,” Refkin said. “This will put most of the events into a beautiful customer dashboard, which is almost like a visual receipt of everything the agent has done for them.”
While Compass executives acknowledge the headwinds the industry currently faces, they are optimistic about the company’s future.
“Assuming we continue to add net agents annually, maintain or moderately improve our agency economics, and maintain annual cost savings of $600 million, and achieve a minimum inflation rate of 3% to 4% in 2025 and beyond, we believe this Hundreds and thousands in revenue will be generated.
