In a generally upbeat Q1 earnings report May 8, residential real estate company Compass showcased $1.05 billion revenue, a 10% increase from Q1 2023. The company attributed the revenue gain to a 7.1% increase in transactions. On the negative side, Compass lost $132.9 million in Q1, still an improvement over the $150.2 million it lost one year prior. Part of the Q1 loss was attributed to the $57.5 million the company agreed to pay to settle multiple commission lawsuits.
Regarding agent count, the company was happy to report a Q1 rise of 7.3% year-over-year to 14,591.
“We exceeded our expectations for Q1 2024 by growing our Q1 revenue 10% year-over-year and significantly reducing our non-GAAP operating expenses, generating positive free cash flow,” said Robert Reffkin, Compass founder and CEO. “This is the first time we have generated positive free cash flow in the first quarter, the industry’s slowest quarter of the year, and in a historically challenging market. In Q1 2024 we grew our quarterly market share by 26 basis points year-over-year and 35 basis points sequentially, compared to Q4 2023. We did this while continuing to invest in growth and our technology platform, the industry’s only proprietary first-contact-to-close solution for agents.
He continued, “We continued to significantly grow our agent base as we increased the number of principal agents by 990 in Q1 2024 compared to Q1 2023. In Q1 2024 we added the highest number of principal agents organically since we eliminated cash and equity sign-on incentives in 2022. Since the close of the first quarter, we have further increased our presence in the southeast by acquiring Latter & Blum, the number one agency in the Gulf South and New Orleans, adding over 1,000 principal agents. We continue to look for accretive M&A transactions and to attract new agents organically as we successfully position Compass for what we believe will be significant upside when the market begins to recover.”
Q1 2024 highlights:
- Revenue increased by 10% YoY to $1.05 billion as transactions increased 7.1%, while transactions declined by 3.5% for the entire residential real estate market in Q1, as reported by the National Association of REALTORS®.
- GAAP net loss was $132.9 million, an improvement of $17.5 million from Q1 2023. The net loss includes an expense of the full $57.5 million proposed settlement of class action lawsuits which the company will pay over 2024 and 2025, non-cash stock-based compensation expenses of $32.9 million, and depreciation and amortization of $20.8 million.
- Adjusted EBITDA (a non-GAAP measure) was ($20.1) million compared to ($67.1) million in Q1 2023. This is an improvement of $47 million, or 70%. Adjusted EBITDA excludes, among other items, $57.5 million in antitrust settlement costs accrued in the quarter.
- Operating cash flow was $8.6 million, an improvement of $64.1 million from ($55.5) million in Q1 2023, and free cash flow was $5.9 million, an improvement of $64.9 million from ($59) million in Q1 2023.
- Cash and cash equivalents was at $165.9 million, and there were no outstanding draws on our revolving credit facility.
- National market share was 4.76%, an increase of 26 basis points compared to Q1 2023 and an increase of 35 basis points sequentially from Q4 2023.
- The number of principal agents was at 14,591, compared to 13,601 in Q1 2023, an increase of 990 or 7.3% year-over-year. Sequentially, when comparing Q1 2024 to Q4 2023, Compass had a decrease of 92 principal agents or 0.6%. However, the company had an increase compared to Q4 2023 when excluding the more than 100 principal agents who exited the business that had no transactions at Compass in the last 12 months.
- Compass agents closed 38,449 total transactions, an increase of 7.1% compared to Q1 2023 (35,886). Transactions for the entire U.S. residential real estate market declined 3.5% for the same period, according to NAR.
- Gross transaction value was $40.1 billion, an increase of 9.6% compared to the Q1 2023 GTV of $36.6 billion. The entire U.S. residential real estate market GTV increased 3.6% for the same period, according to NAR.
