The fast-growing brokerage posted $2 billion in revenue in the second quarter of this year, but losses also climbed to $101 million, according to an earnings report issued Monday.
Amid what management describes as a “big recession” in the market, rapid growth Brokerage firm Compass said Monday that its earnings rose just 4% in the second quarter of 2022, while losses rose significantly over the same period.
In its earnings report, the company revealed that it made more than $2 billion in revenue between April and June. That’s up from his just under $2 billion in the same period in 2021. This 4% revenue increase is well below what Compass has achieved in other recent quarters.
In a conference call with investors Monday afternoon, CEO Robert Reffkin said: Fed rate hike decision —something that pushes consumer mortgage rates up—has had “direct effects that have pushed down our earnings.” It creates an enormous amount of uncertainty during this period.”
“When I was at Compass, we never saw a recession this big in such a short period of time,” Reffkin continued.
The company also revealed in its earnings report that it lost $101.2 million in the second quarter of this year. This is a significant increase from his loss of just $7.1 million from April to June of 2021. Increased expenses related to strategic business initiatives, non-cash stock-based compensation, depreciation and restructuring charges.
Compass reported an average of 12,979 lead agents during the second quarter. This is his 405 increase from his previous three months. These agents completed 66,846 transactions between April and June. This was a 2% year-on-year increase, with $76.8 billion in transaction volume. In the report, the company describes volume as “relatively flat year-over-year.”
Heading into Monday’s earnings report, Compass stock was trading at around $4.60. That’s up from his record low of under $4 a share in June, but down from when the company first topped his $20 a share. Listed in April 2021.
Shares fell in after-hours trading after Compass reported earnings on Monday.
Compass had a market capitalization of just under $2 billion when the market closed Monday afternoon.
In recent quarters, Compass’s revenue has increased significantly.at the company Last reported earnings in Maysaid it generated $1.4 billion in revenue in the first three months of 2022.
a quarter ago, in the final months of 2021, Compass brought in $1.6 billion. This is a 31% increase compared to a year ago.
But the surge in revenue over the past few quarters hasn’t been enough to turn the company profitable. In his final three months of 2021, Compass lost his $175 million, and in the first quarter of 2022 he lost $188 million.
In response to tough market conditions, Compass said in a report Monday that it is currently implementing a “cost reduction” program that could ultimately save $320 million. layoffs in June Cutting about 450 jobs is part of the program, and Lefkin said on a conference call with investors that brokerages “are taking new and additional steps to meet these market conditions.”
Lefkin said, among other things, that Compass is not currently expanding into new markets, instead focusing on investing in current markets and the agencies that work there.
Lefkin said he believes that by cutting expenses, Compass can have positive cash flow in 2023. Remove financial incentives and stock offerings As part of your recruitment strategy. Going forward, brokerages will focus on generating positive cash flow, making profits, gaining market share, and “retaining agency,” Lefkin said.
Compass’ latest report comes at the end of a pivotal and somewhat surprising earnings season for the real estate industry. Thanks to ongoing market shifts that kicked in in earnest in the spring, companies that had performed well in the past were suddenly faced with much more difficult circumstances. In other words, higher mortgage interest rates Lower sales also meant potentially less money flowing into public company bank accounts.
a A series of layoffs at real estate companies — Mortgage firms were the first to take the hit, but the losses have since spread to many brokerages — and hinted that this was going to be a brutal earnings season for the housing industry.
after all, but things weren’t so bad Many companies remain profitable, such as Zillow and Offerpad.
Compass’ Monday report caps off this latest earnings season with a whimper, with moderate earnings growth and rising losses. However, in an email Lefkin sent to members of his company on Monday, Lefkin claimed Compass continues to invest in the agency and is not at risk of running out of cash.
On a conference call with investors, Reffkin was also optimistic about Compass’s long-term prospects, but was candid about the challenges facing the market today.
“We hope to come out of this recession and be an even stronger company,” he said.
Update: This post has been updated with additional information from the Compass Earnings Report and Call for Investors.