Despite a net loss of $100 million in the third quarter of 2021, Compass CEO Robert Reffkin said he was pleased with the brokerage’s performance.
“I just wanted to say, again, how happy I am to our performance this quarter and our outlook for what’s still to come,” Reffkin said in his closing remarks on the company’s third-quarter earnings call on Wednesday.
Brokerage market share is also down from the second quarter, which fell to 5.4% in Q3 from 6.2% in Q2, a drop that Compass attributes to typical seasonal fluctuations in the market.
Reffkin and CFO Kristen Ankerbrandt, however, stressed that they firmly believe the brokerage is on track to achieve profitability in 2022.
According to Compass executives, the brokerage will reach this milestone by improving the attachment rate of its title and escrow services, launching its joint venture mortgage services platform Point of origin in the fourth quarter of 2021 and continues to expand into other markets.
“First, these adjacent services will improve our long-term profitability profile,” Reffkin said on the call. “Second, integrating these services into the platform will enable agents to provide a more integrated and seamless experience for their customers, contributing to higher attachment rates; and third, the best thing about the adjacent services business model is that there is little to no additional customer acquisition costs for Compass because our agents already have the customer relationship.
In the month of September alone, Compass Acquired three securities and escrow firms, expanding its securities services to nine states and Washington, DC and bringing in-house securities capabilities to 47% of the 67 markets the brokerage currently serves. The tether rate, however, still sits at just a “single-digit percentage” of the brokerage’s total trades in the third quarter.
During this time, Point of origin, its JV with the mortgage lender Guaranteed rate, has obtained operating licenses in six states and the company says it is busy hiring loan officers as it prepares to take out its first mortgage in the next quarter, well ahead of its scheduled start date .
An encouraging sign is that the brokerage’s revenue rose 47% year-over-year to $1.74 billion thanks to Compass agents closing 62,349 deals in the third quarter, up 36% over the previous year. That brought gross deal value for the quarter to $69.1 billion, a third-quarter record for the New York-based company. Additionally, 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 the client,” Reffkin said. “The recent turbulence seen by alternative models seeking 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 0 billion in annual fees and being the primary source of referrals for an additional $140 billion in real estate-related spending.
As the brokerage nears the end of the year, executives remain positive about the direction of the company.
“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.