Despite a net loss of $100 million in the third quarter of 2021, Compass CEO Robert Reffkin said he was thrilled with how the brokerage had performed.
“I just wanted to say, once again, how pleased I am with our performance this quarter and our outlook of what is still to come,” Reffkin said in his closing remarks on the firm’s Q3 earnings call on Wednesday.
Also trending down from the second quarter is the brokerage’s market share which fell to 5.4% in Q3 from 6.2% in Q2, a decrease Compass attributes to typical seasonal market fluctuations.
Reffkin and CFO Kristen Ankerbrandt, stressed, however, that they firmly believe that the brokerage is on track to achieve profitability in 2022.
According to Compass executives, the brokerage will reach this milestone by improving the attach rate of its title and escrow services, launching its joint-venture mortgage services platform OriginPoint during the fourth quarter of 2021, and continuing to expand into more markets.
“First, these adjacent services will enhance our long-term profitability profile,” Reffkin said during the call. “Second, integrating these services into the platform will empower agents to deliver a more integrated, seamless experience to their clients, contributing to higher attach rates; and third, the best thing about the adjacent service business model is that there’s little to no incremental customer acquisition costs for Compass because our agents already have the client relationship.”
During September alone, Compass acquired three title and escrow firms, expanding its title services to nine states and Washington, D.C. and bringing in house title capabilities to 47% of the 67 markets the brokerage currently serves. The attach rate, however, still sits at only a “mid-single digit percentage” of the brokerage’s total transactions in the third quarter.
Meanwhile, OriginPoint, its JV with mortgage lender Guaranteed Rate, has obtained operation licenses in six states and the company says it is busy hiring loan officers as it prepares to originate its first mortgage in this next quarter, well ahead of the projected start date.
One encouraging sign is that the brokerage’s revenue grew 47% year-over-year to $1.74 billion thanks to Compass agents closing 62,349 transactions during the third quarter, up 36% from the year prior. This brought the quarter’s gross transaction value to $69.1 billion, a third quarter record for the New York-based firm. In addition, Compass increased its number of principal agents by 987 from the second quarter to 11,616.
“Our ability to see these operational and financial expectations is a direct result of our intense focus on the agent as our customer,” Reffkin said. “Recent turbulence seen by alternative models looking to replace the traditional agent is an important reminder that the agent is not going away. The agent will continue to be at the center of the transaction, controlling $100 billion in annual commissions and being the primary source of referrals for an additional $140 billion in real estate related spends.”
As the brokerage approaches the end of the year, executives remain positive about where the company is going.
“Compass is in the strongest position we’ve ever been in and since going public we’ve done everything we said we would do and we’ve done it faster,” Reffkin said.