In a Q4 and full year 2024 earnings call February 18, Compass—the tech-focused real estate services company that trumpets itself as the largest residential real estate brokerage in the U.S. by sales volume—announced strong Q4 results, a lessening of year-over-year losses and impressive agent-count growth.
“Despite a year in which resale transactions experienced a 29-year low, Compass grew revenue significantly and delivered $122 million in operating cash flow, or $150 million prior to the NAR-related settlement payment,” said Robert Reffkin, founder and CEO. “As the market recovers, we believe the combination of our cost discipline and structural advantages, which include our end-to-end proprietary technology platform, national scale, network of top agents and depth of inventory, positions Compass to capture significant upside.
“These results are clear evidence that our playbook is working,” he continued. “As a reminder, our playbook consists of, first and foremost, controlling our organic opex at 3% to 4% annual growth; second, growing marketshare by adding agents organically, executing accretive M&A and using the Compass platform to enhance agent productivity; and lastly, expanding margin by increasing attach of mortgage and title.”
Reffkin said that in the fourth quarter, Compass grew transactions by 24.1%, or 3.5 times faster than the market, where transactions grew by 6.8% year-over-year. It led to quarterly marketshare of 5.06%, or an increase of 65 basis points, which is its highest year-over-year increase in marketshare in 12 quarters.
The company’s stock was trading sharply higher early Wednesday following the announcement, up almost 13% at press time.
“I believe 2025 will be the year that the gap between Compass and the industry widens,” Reffkin added. “By leveraging our structural advantages and our affiliation with the Christie’s International Real Estate brand, we are positioning ourselves to accelerate our marketshare gains.”
Compass reported that at the end of Q4 2024, the number of principal agents was 17,752, compared to 14,683 at the end of Q4 2023, an increase of 3,069 or 20.9% year-over-year. Sequentially, from Q3 2024 to Q4 2024, Compass hired 669 principal agents on a gross basis, resulting in a net increase of 210 principal agents as Compass managed out non-producers at the end of the year. It continued the trend of strong agent retention with 96.9% quarterly principal agent retention in Q4 2024, flat versus the prior year quarter.
Reffkin claimed that the National Association of REALTORS® (NAR) settlement in the Burnett lawsuit settlement last year would help Compass immeasurably.
“The structural change is driven by the fact that NAR will no longer be able to have anti-competitive rules that prevent large brokerages and top agents from competing freely and gaining marketshare,” he said. “NAR’s revenue model is based on the number of agents in the industry paying dues. I believe they don’t want large brokerages and top agents to gain marketshare because it would result in less agents in the industry and less revenue from agent dues. NAR’s rules artificially propped up the least experienced agents and the smallest brokerages, resulting in the number of agents in the U.S. increasing nearly 100% since the year 2000, while during the same time period, the U.S. population grew only 20%, and the number of annual home sales declined by 20%
“As recently reported by RISMedia, the gap in income between an agent with less than three years of experience and 10-plus years of experience is 20% larger post the MLS rule change. Per this study before August 17, the commission delta between an agent with less than three years of experience and an agent with 10-plus years of experience was relatively flat at just 12 basis points. But post the settlement, it has now moved to 85 basis points. This makes sense.”
Getting back to Q4 results, Kalani Reelitz, Compass CFO, added that, “We continue to strengthen our balance sheet, and ended the quarter with a cash balance of $223.8 million. In Q4 2024, we generated positive operating cash flow of $30.5 million and free cash flow of $26.7 million, which made us free cash flow positive in every single quarter in 2024. For the full-year, operating cash flow was $121.5 million and free cash flow was $105.8 million.”
Q4 2024 highlights
- Revenue in Q4 2024 increased by 25.9% year-over-year to $1.4 billion as transactions increased 24.1%. Year-over-year organic revenue growth was up 20.9%, while revenue growth attributable to the acquisitions completed within the prior 12 months was 5%.
- GAAP Net loss in Q4 2024 was $40.5 million, an improvement of $43.2 million from a net loss of $83.7 million in Q4 2023. The net loss for Q4 2024 includes non-cash stock-based compensation expense of $31.2 million and depreciation and amortization of $19.7 million.
- Adjusted EBITDA was $16.7 million in Q4 2024 compared to a $23.7 million loss in Q4 2023, an improvement of $40.4 million. Excluding M&A related transaction costs of $4.2 million, Adjusted EBITDA in Q4 2024 would have been $20.9 million.
- Cash and cash equivalents at the end of Q4 2024 was $223.8 million, and there were no outstanding draws on revolving credit facility at that time.
Q4 2024 operational highlights
- National marketshare: In Q4 2024, quarterly marketshare was 5.06%, an increase of 65 basis points compared to Q4 2023 and an increase of 26 basis points sequentially from Q3 2024. This compares favorably to the nine basis point increase year-over-year in Q4 2023 compared to Q4 2022 and a 10 basis point increase sequentially from Q3 2023 to Q4 2023.
- Compass agents closed 50,411 total transactions in Q4 2024, an increase of 24.1% compared to Q4 2023. Organic transactions in Q4 2024 increased by 15.5% compared to Q4 2023. Transactions for the entire U.S. residential real estate market increased 6.8% for the same period, according to NAR.
