Compass, Inc. Q1 FY2025 earnings call

• Record adjusted EBITDA in Q1, increased market share and agent count to record levels. • Retained agents at industry-leading levels, generated positive free cash flow. • Closed Christie's International Real Estate acquisition, with four affiliates joining the network. • Addressed NAR's clear cooperation, emphasizing homeowner choice. • Long-term strategy includes controlling organic OpEx at 3%-4% growth, expanding margins via title/escrow attach rates, growing Christie's affiliate business, and stacking higher-margin revenue streams.

In the first quarter, Compass, Inc. saw revenue increase by 28.7% year over year. Total transactions and organic transactions increased by 27.8% and 7.3% year over year, respectively. Adjusted EBITDA reached a record $16 million, up from a negative $20 million in the year-ago quarter. The title and escrow business grew to record levels. The Christie's International Real Estate acquisition was closed, with four new affiliates joining the network in the two and a half months since close. Revenue contribution from different segments: brokerage transactions, title and escrow, and the Christie's affiliate business are key, with title and escrow showing potential for increased unit economics per brokerage transaction.

• Q2 2025 revenue expected in the range of $2 billion to $2.15 billion, adjusted EBITDA in the range of $115 million to $135 million. • Full-year 2025 OpEx range updated to $1.017 billion to $1.042 billion, with organic like-for-like OpEx growth expected in the 3%-4% range. • Weighted average share count for Q2 expected to be between 560 million to 563 million. • Stock-based compensation expense expected to be in the $55 million range for Q2, driven by accounting rules.

• Market volatility and NAR's policies could impact transactions, potentially causing deferral of demand. • Uncertainties in achieving synergy goals from acquisitions. • Seasonality and timing of OpEx, such as employee compensation cycles, could affect financial results.

Q: Could you help think about what revenue or what was revenue growth tracking to ahead of the disruption in March? And as we think about the 2Q guide, what is revenue growth tracking in April?

A: Robert and Kalani responded that Q1 was tracking close to the midpoint of the guide, April is tracking at expectations, factoring in volatility, Easter dayfall adjustment, and anniversary of acquisitions.

Q: Could you level set for investors what's the latest with NAR's clear cooperation policy? And is your sort of legal standing of the three-phase marketing strategy still intact?

A: Robert stated that the three-phase marketing strategy works under current rules, supports homeowner choice, and NAR is not a law, so the legal standing is intact.

Q: Has there been any change in the organic recruiting effort for the company post NAR changes?

A: Robert and Kalani said that organic recruiting momentum continues, with 700 organic agent adds in Q1, and the three-phase marketing strategy continues to resonate, especially with top and luxury agents.

Q: Talk about churn trends in the quarter and what your yardstick for success of the three-phase marketing strategy is?

A: Kalani said churn was in line with historical levels, and success of the three-phase marketing strategy is measured by agents differentiating, outperforming, getting more listings, and homeowners having marketing flexibility.