New York, NY - February 27, 2024 - Compass, Inc. (NYSE: COMP) (“Compass” or “the Company”), the largest residential real estate brokerage in the United States by sales volume[1], announced its financial results for the fourth quarter and full year ended December 31, 2023.

“Over the past two years, we have successfully navigated the worst residential real estate market in decades and significantly reset our operating expense levels, positioning Compass for what we believe will be a significant upside when the market begins to recover,” said Robert Reffkin, Founder and Chief Executive Officer of Compass. “As we reduced operating expenses, we continued to invest in growth, our agents, and our technology platform, the industry’s only proprietary first-contact-to-close platform. We recruited more than 2,000 principal agents without cash or equity sign-on incentives since eliminating those incentives in August 2022, and we increased the number of principal agents by 7.7% in Q4 2023 compared to Q4 2022. We grew quarterly market share both year-over-year and quarter-over-quarter[2] in Q4 2023, and we continued the trend of strong agent retention, achieving 97% principal agent retention in Q4 2023. In 2023, we continued to build our technology advantage as we added 103 features to our platform, including Performance Tracker, Compass AI enhancements, and ‘1 Click Title & Escrow.’”

Kalani Reelitz, Chief Financial Officer of Compass, said, “In January 2023, we announced our 2023 target range of $850 million to $950 million of annualized non-GAAP operating expenses, or OPEX[3]. We expected to be below the midpoint of that range in Q4 of 2023. One year later, I’m pleased to announce we ended the year below the midpoint goal and expect to further reduce our full-year 2024 non-GAAP OPEX to $865 million. We expect non-GAAP OPEX will grow thereafter at a nominal rate of 3-4% per year, excluding M&A over the next few years. We have built an operating structure that has set us up for margin expansion when market conditions improve. These reduced non-GAAP OPEX levels have allowed us to improve our cash flow significantly. For the full year of 2023 compared to the full year of 2022, we have been able to achieve a $266 million improvement in our operating cash flow and a $325 million improvement in free cash flow even as revenue declined by $1.1 billion.”

Q4 2023 and Full Year Financial Highlights:

• Revenue in Q4 2023 decreased by 1% year-over-year to $1.1 billion as transactions declined 4.9% driven by macroeconomic factors. For the full year, 2023, revenue was $4.9 billion compared to $6.0 billion in 2022, a decrease of 19%.

• GAAP Net Loss in Q4 2023 was $83.7 million, an improvement of $74.4 million or 47% from a Net Loss of $158.1 million in Q4 2022. The Net loss for Q4 2023 includes non-cash stock-based compensation expenses of $36.3 million and depreciation and amortization of $21.5 million. For 2023, Net loss was $321.3 million compared to $601.5 million in 2022, a reduction of $280.2 million or 47%.

• Adjusted EBITDA[4](a non-GAAP measure) was ($23.7) million in Q4 2023, compared to ($75.3) million in Q4 2022. This is an improvement of $51.6 million or 69%. In 2023, Adjusted EBITDA was ($38.9) million compared to ($210.0) million in 2022, an improvement of $171 million or 81%.

• Operating Cash Flow / Free Cash Flow [4] (a non-GAAP measure): during Q4 2023, operating cash flow was ($38.7) million, and free cash flow was ($41.0) million, the difference being the treatment of capital expenditures. For 2023, Operating cash flow was ($25.9) million compared to ($291.7) million in 2022, an improvement of $265.8 million or 91%. Free Cash Flow for the full year 2023 was ($37.1) million compared to ($361.8) million in 2022, an improvement of $324.7 million.

• Cash and Cash Equivalents at the end of Q4 2023 was $166.9 million, with no draw of our revolving credit facility. Compared to year-end 2022 of $361.9 million, the cash balance declined $195 million primarily driven by net repayments of drawdowns on the revolving credit facility of $150 million.

Q4 2023 Operational Highlights:

• Platform: the Compass end-to-end technology platform allows real estate agents to perform their primary workflows, from first contact to close, with a single log-in and without leaving the Compass platform.

  • In 2023, we continued to enhance the platform with 103 features, including Performance Tracker, Compass AI, and ‘1-Click Title & Escrow’.

  • We continued the rollout of our title and escrow business integration into the technology platform in Philadelphia, Washington DC, Maryland, and Virginia and plan to roll out this integration feature to all the markets where we currently offer title and escrow services in Q3 2024, including in our newest title & escrow market - Florida.

• National Market Share in Q4 2023 was 4.41%, an increase of 9 basis points in Q4 2023 compared to Q4 2022 and 10 basis points in Q4 2023 compared to Q3 2023[5].

• Agents: Average Number of Principal Agents was 14,689 for Q4 2023, a 7.7% increase of 1,046 principal agents from Q4 2022 and a 4.5% increase sequentially of 634 from Q3 2023.[6]Compass continued to experience high levels of principal agent retention, with 97% agent retention in Q4 2023. In the fourth quarter, we managed out approximately 50 principal agents and 400 total agents with an average gross commission income of less than $10,000, which had the additional benefit of freeing up resources for the rest of our producing agents.

• Transactions: Compass agents closed 40,621 Total Transactions in Q4 2023, a decline of 4.9% compared to Q4 2022 (42,719). Transactions for the entire U.S. residential real estate market declined 9.2% for the same period.[1] For the full year of 2023, transactions were 178,848 compared to 211,538 in 2022, a decline of 15.5% compared to a decline of 18.7% for the entire U.S. residential market.

• Gross Transaction Value (“GTV”)[8] was $41.8 billion in Q4 2023, a decline of 1.6% compared to Q4 2022 GTV of $42.5 billion, while national market GTV was down 3.7% for the same period. For the full year 2023, GTV was $186.1 billion compared to $230.3 billion in 2022, a decline of 19.2% compared to a national market GTV decline of 17.3%.

Additional information can be found in the Company’s Q4 2023 Earnings Presentation, which can be found in the Investor Relations section of the Compass website at https://investors.compass.com.

Outlook

Q1 2024 Outlook:

• Revenue of $975 million to $1,075 million

• Adjusted EBITDA of negative $22 million negative $40 million

FY 2024 Outlook:

• Non-GAAP OPEX of $855 million - $875 million[1]

• Expects to be free cash flow positive for the full year 2024

We have not reconciled our guidance for Adjusted EBITDA to GAAP Net loss because certain expenses excluded from GAAP Net loss when calculating Adjusted EBITDA cannot be reasonably calculated or predicted at this time. Additionally, we have not reconciled our guidance for non-GAAP OPEX to GAAP OPEX because certain expenses excluded from GAAP OPEX cannot be reasonably calculated or predicted at this time. Accordingly, reconciliations are not available without unreasonable effort.

[1] Compass was ranked number one in sales volume for 2022 by RealTrends in March 2023 for the second year in a row.

[2] Q3 2023 national market share has been updated to 4.31%.

[3]Non-GAAP OPEX excludes Commissions and other related expenses, Depreciation and amortization, Stock-based compensation, and other expenses excluded from the Company’s calculation of Adjusted EBITDA. We calculate the non-GAAP OPEX annualized run rate by taking the sum of the quarter’s non-GAAP sales and marketing, operations and support, research and development, and general and administration expenses and multiplying it by four.

[4] A reconciliation of GAAP to Non-GAAP measures can be found within the financial statement tables included within this press release.[2] Q3 2023 national market share has been updated to 4.31%.

[5] Q3 2023 national market share has been updated to 4.31%.

[6] During the first quarter of 2023, we began to utilize an updated methodology for tracking and reporting our agent statistics. The Average Number of Principal Agents and year-over-year growth reported in this press release is based on the updated methodology.

[7]We calculate Total Transactions by taking the sum of all transactions closed on the Compass platform in which our agent represents the buyer or seller in the purchase or sale of a home (excluding rental transactions). We include a single transaction twice when one or more Compass agents represent both the buyer and seller in any given transaction.

[8]Gross Transaction Value includes a de minimis number of new development and commercial brokerage transactions.

[9] Non-GAAP OPEX excludes Commissions and other related expenses, Depreciation and amortization, Stock-based compensation and other expenses excluded from the Company’s calculation of Adjusted EBITDA. We calculate non-GAAP OPEX annualized run rate by taking the sum of the quarter’s non-GAAP sales and marketing, operations and support, research and development, and general and administration expenses and multiplying it by four. For a reconciliation of GAAP OPEX to non-GAAP OPEX see the financial statement tables included within this press release.

For a reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures on a historical basis, see “Reconciliation of Net Loss Attributable to Compass, Inc. to Adjusted EBITDA,” “Reconciliation of GAAP OPEX to non-GAAP OPEX” and “Reconciliation of GAAP Operating Cash Flow to Free Cash Flow” in the financial statement tables included within this press release.