Real Estate Giant Compass Reports Net Loss of $602M — Loss Now More Than a Billion in Past 2 Years
Wednesday, March 01, 2023
Compass, the national real estate firm that purchased Lila Delman in Rhode Island, has piled up massive losses over the past two years.
On Tuesday, the company announced its 4th quarter and full 2022 fiscal year results.
"2022 was a difficult year for the residential real estate market and Compass. The unexpected and rapid 18% decline in industry-wide transactions resulted in one of the worst years for the real estate market and a decline at the same rate as the 2007-2008 housing crisis," said Robert Reffkin, Founder and Chief Executive Officer of Compass. "Despite industry challenges, Compass increased market share year-over-year with transactions being down 6% compared to the industry decline of 18% year-over-year. Moreover, our principal agent retention for Q4 2022 was 98% which is the same as Q3 2022 and Q4 2021. We attribute a significant amount of our agents' productivity to our differentiated technology platform, which is the only proprietary end-to-end technology platform for agents in the country."
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While the company is seeking to be cash flow positive in 2023, the financial performance and three rounds of layoffs took their tool.
In 2022, the Company initiated actions that reduced its non-GAAP operating expenses by approximately $338 million on an annualized run rate1 basis from Q2 2022 to Q4 2022. In 2023, that cost-cutting plan has evolved and grown and the Company believes that it can bring expenses to a range of $850-$950 million in 2023 and realize the high-end of this range in the second quarter of 2023. Furthermore, the Company believes it is possible to achieve below the midpoint of the $850-$950 million range by the fourth quarter of 2023.
4Q22 Financial Highlights:
- Revenue decreased by 31% year-over-year to $1.11 billion as transactions declined 25%, which was attributable to lower industry wide transactions.
- GAAP Net Loss was $158 million, an improvement from a net loss of $175 million in 4Q21. The net loss for 4Q22 includes non-cash stock-based compensation expenses of $61 million and depreciation and amortization of $21 million.
- Adjusted EBITDA (a non-GAAP measure) was a loss of $75 million in 4Q22, compared to a loss of $51 million in 4Q21.
- Cash and cash equivalents: Compass' net cash and cash equivalents at the end of 4Q22 was $362 million which includes a $150 million draw on the revolver.
FY22 Financial Highlights:
- Revenue decreased by 6% year-over-year to $6 billion as transactions at Compass also declined 6%, which was driven primarily by lower industry wide transactions.
- GAAP Net Loss includes non-cash stock-based compensation expenses of $235 million, depreciation and amortization of $86 million, restructuring charges due to the cost saving actions of $49 million, and litigation charges of $11 million. The net loss for FY22 was $602 million compared to $494 million in FY21, which was driven by lower revenues and restructuring costs, partially offset by reductions in operating expenses.
- Adjusted EBITDA was a loss of $210 million in FY22 compared to $2 million of income in FY21, driven by lower market activity due to unfavorable macroeconomic conditions.
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