Compass reported first quarter results that fell short of Wall Street’s revenue and profit expectations, leading to a sharp negative market reaction. Management attributed the quarter’s mixed performance to both industry headwinds and execution on strategic initiatives, citing strong agent recruitment and increased market share despite ongoing volatility. CEO Robert Reffkin emphasized that Compass outpaced the broader real estate market in transaction growth, noting, “Compass’s total transaction count outpaced the market by close to 30%.” The company also highlighted record retention rates and the initial benefits of its Christie's International Real Estate acquisition. However, management acknowledged some caution, pointing specifically to market disruption in March related to tariff policy discussions and a temporary dip in transaction activity.
Is now the time to buy COMP? Find out in our full research report (it’s free).
Compass (COMP) Q1 CY2025 Highlights:
- Revenue: $1.36 billion vs analyst estimates of $1.42 billion (28.7% year-on-year growth, 4.6% miss)
- Adjusted EBITDA: $15.6 million vs analyst estimates of $20.47 million (1.2% margin, 23.8% miss)
- Revenue Guidance for Q2 CY2025 is $2.08 billion at the midpoint, below analyst estimates of $2.11 billion
- EBITDA guidance for Q2 CY2025 is $125 million at the midpoint, below analyst estimates of $126.9 million
- Operating Margin: -4%, up from -12.5% in the same quarter last year
- Transactions: 49,121, up 10,672 year on year
- Market Capitalization: $3.32 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions Compass’s Q1 Earnings Call
- Chris Kuntarich (UBS) asked about the impact of March’s market disruption and whether lost transactions would recover later in the year. CEO Robert Reffkin responded that he expects the dip was temporary and that deferred transactions should be completed if market stability returns.
- Steve Roman (Oppenheimer & Co.) sought clarity on the legal standing of the three-phase marketing strategy amid evolving industry regulations. CEO Robert Reffkin reiterated that the approach remains compliant and continues to offer homeowners more choice under current rules.
- Bernie McTernan (Needham & Company) inquired about whether recent changes in industry policy affected agent recruiting momentum. CFO Kalani Reelitz stated that agent recruitment remained strong and that the company continues to see favorable trends in both technology adoption and inventory strategy.
- Michael Ng (Goldman Sachs) questioned trends in agent churn and metrics for success with the three-phase marketing strategy. CEO Robert Reffkin explained that churn was in line with historical patterns and that the goal is to provide agents with a competitive edge, leading to increased listings and better transaction terms for clients.
- Elizabeth Langan (Barclays) asked how agents utilize private exclusive listings and whether most eventually transition to public market listings. CEO Robert Reffkin explained that 94% of listings, including those that begin as private exclusives, ultimately reach the MLS, with the three-phase approach offering flexibility without limiting exposure.
Catalysts in Upcoming Quarters
In the coming quarters, our team will closely watch (1) Compass’s ability to sustain its agent recruitment momentum amid industry regulatory changes, (2) further expansion and integration of title, escrow, and Christie's affiliate businesses to improve margin profile, and (3) how well the company navigates transaction volume volatility tied to macroeconomic and policy shifts. Progress in cross-selling ancillary services and maintaining operational discipline will also be key indicators of execution.
Compass currently trades at $6.51, down from $7.71 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free).
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