Compass ended 2024 with a net loss of over $154 million

Boston Condos for Sale and Apartments for Rent

Compass ended 2024 with a net loss of over $154 million

Compass reported its first-ever cash flow-positive period in the second quarter of 2023. It was an important milestone after a year-long cost-cutting campaign and a first in its life as a public company. It kept positivity in the following quarter, but fell into losses while finishing the year. 

It returned to cash flow positivity in the first quarter of 2024 and marked a full year in its results announced in May. Compass upped its free cash flow in the first quarter to $19.5 million and narrowed its net losses by $82 million to $51 million — only for its stock to fall 19 percent the following day. 

Compass put up by far the worst May of its publicly-traded competitors, watching its stock fall to $5.91 from $7.81 to close the month, down 24 percent. 

Douglas Elliman was the only other brokerage to see its stock price swing double-digit percentage points, but its value went in the other direction. The beleaguered brokerage saw its price jump over 60 percent, from $1.69 to $2.72, on news that it received a merger offer from Anywhere Real Estate.  

After arguably exceeding expectations for most of 2024, Compass opened 2025 with a bit of dud, missing consensus estimates on revenue and earnings per share, according to Yahoo Finance. Analysts responded by moving full-year breakeven projection to 2026 from 2025. 

“We took down our forecasts pretty massively,” said Needham analyst Bernie McTernan, noting much of that was related to a weak housing market. But in a critical moment for Compass being able to cut its way to profitability and create a flywheel for agent growth with its recent inventory push, “I don’t think the thesis is shaken,” he added. 

A Compass spokesperson said that the “miss relative to consensus was largely driven by volatility that we began to observe in mid-March as the news around tariffs caused a pause in activity.” They added that the reduced analyst forecasts were driven by lower-than-expected overall market growth.

The company also suffered a blow on a strategic front when Zillow unveiled an updated listing policy that appeared to target Compass’ three-phased marketing strategy, which involves listing homes without publishing them on the MLS. “It definitely seems like Zillow took one of the legs out from under the stool,” McTernan said. 

Compass, which has taken in over $2 billion in equity investment and has an earnings multiple more in line with a tech company than a brokerage, also has more pressure to perform like a growth stock.

Although Compass managed to hit a profitable second quarter last year, it ended the year with a net loss of over $154 million. The company has splurged on a number of acquisition deals in the past year, which has been a major revenue driver and helped increase its market share to a record 6 percent. 

“When they’re growing revenue, fixed costs are great,” McTernan said.

One workaround for the company has been the use of stock-based compensation to incentivize employees and recruit agents, which CFO Kalani Reelitz said he expects to be managed down to $100 million per year. But the company still has over $277 million in unrecognized stock-based compensation, all of which will weigh on the company’s long-term trajectory. 

“We have a well-defined path to reducing our annual stock-based compensation over the next three years,” a Compass spokesperson said. “The $277 million is factored into the $100 million target we expect over the long term, so it is not a concern for us.”

The company recognized over $30 million of stock-based compensation in the first quarter of last year, down slightly from the year prior. 

While Reffkin has maintained that he will be aggressive in seeking M&A opportunities, the less costly growth trajectory relies on continued organic agent recruitment. On the earnings call, Reelitz said that he continued to hear that Compass’ “inventory strategy, the depth of inventory [and] the three-phase marketing” have helped in agent recruitment.

Earlier this year, Compass sued Seattle-based Northwest MLS for interfering with the company’s private exclusive model, claiming at one point the listing service shut off its access to the listing service’s data feed until Compass removed all of its private exclusive inventory from the market. 

At the Compass’ annual retreat held in early June, Reffkin confirmed to agents that Zillow would “say every private listing is banned” if Compass didn’t remove references to private exclusive listings from its website. 

“Does it feel to anyone that we’ve been discouraged from our private listings, or is it just me?” Reffkin asked the audience, claiming that listing services have flouted a National Association of Realtors’ policy that prohibits listing services from discouraging the use of office exclusives. 

Last month, the California Regional MLS voted in approval of a NAR amendment that would remove the office exclusive carve-out that currently allows Compass’ private exclusives to exist. 

For Reffkin, the solution remains the same — just keep growing, which is what he told over 1,200 Compass agents at the firm’s annual retreat. 

“If every one of you doubles your business, if every one of you doubles your listings, we can’t be bullied anymore,” he said. “That is the path.”