Compass remains afloat

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Compass remains afloat

The Compass ship remains afloat and then some: The company hit its goal of cash-flow positivity by mid 2023, 11 years after its founding.

The metric was a reward for the brokerage and bottom-line validation for agents who were willing to defend the firm after 2022’s bleak earnings reports.

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Not All Good News for Compass Agents

Compass agents have lost hundreds of millions of dollars in equity as a result of the company’s poor performance. Some say they felt financially trapped by stringent clawbacks binding them to the firm.

They’ve had plenty of chances to flex their fidelity. After a crash-and-burn public debut in 2021, Compass in 2022 joined the ranks of residential players roiled by the housing market’s drop, plummeting stock prices and waves of layoffs.

The firm began 2023 with sputtering headcount growth. Fourth-quarter results showed its number of principal agents grew by 112 in the quarter, yet its total number of agents rose by just 58 — meaning it lost more non-principal agents than it added.

Choppy waters ahead for Compass in 2024

“What they’re doing, it doesn’t make sense,” said Brown Harris Stevens CEO Bess Freedman in 2022. “They’re not a technology company. They’re a real estate brokerage company that just spent far more than they were making.”

The coming year will test Reffkin’s leadership.

Compass has posted two consecutive cash-flow positive quarters, but it no longer projects to be cash-flow positive for the full year.

It’s also been pulled into the wave of class-action antitrust lawsuits targeting broker commission rules. Compass was named as a defendant in cases filed in Missouri, New York City and Illinois.

Compass and the Bottom Line

I give Compass credit for pulling off two positive consecutive quarters. But they my have a turbulent 2024 with high interest rates, a weaker economy and as stated above potentially devastating lawsuits.