What to watch: Like other brokerages, Compass only has so many levers to pull to reach breakeven.
On the revenue side, the company is considering franchising as a less-expensive growth strategy, and will be trying to accelerate its mortgage joint venture.
If the market remains soft and revenue drops, the only option is to cut even more costs out of the business.
The bottom line: Compass is not alone in needing to cut costs during a significant market downturn – its future depends on it.
The company dipped into its “emergency reserve” last quarter – $150 million from its revolving credit facility – for the home stretch to profitability.
It appears that Compass has made the deep cuts necessary to achieve breakeven this year, as long as nothing else unexpectedly goes wrong.