Compass reports fourth quarter net loss of $175 million

Compass CEO Robert Reffkin (Getty, iStock)

Despite soaring home prices that helped it generate $1.6 billion in revenue, Compass posted a loss of nearly $175 million in the fourth quarter, compared to a loss of $100 million in the third quarter and 40 million over the same period in 2020.

In total, the brokerage, which went public in April, lost nearly half a billion dollars last year, it reported in its quarterly results on Wednesday.

As home sales skyrocketed across the country, the company continued to spend money to attract new agents and expand into new markets.

While annual revenue jumped 72.6% to $6.4 billion last year, operating expenses rose 80.3% to $6.9 billion.

Achieving positive cash flow would be “the ultimate arbiter of financial success”, said Compass CEO Robert Reffkin – a goal he expects the company to achieve by 2023.

To get there, Compass will have to cut what it pays its agents, by far the company’s biggest expense. The brokerage attributed more than half of its fourth-quarter losses — $93.4 million — to non-cash stock-based compensation.

Reffkin said Compass increased its headcount to more than 26,000 agents in the quarter, including a net increase of 560 primary agents from the previous quarter, but it extended 31% fewer incentives than in its “record recruiting quarter” at the end of 2019. The brokerage “is also reducing the use of equity to recruit,” he said, while cutting agent commissions by half a percentage point.

As of midday Thursday, shares of the company had jumped more than 6%, trading above $9, although its shares are still significantly down from its debut above $20 last April.

Compass expanded to 25 additional markets last year, the company reported, boosting its domestic market share to 5.6%, from 4% in 2020. Its agents closed 56,912 transactions, an increase of 20 % year over year.

Ann J. Cox