Compass Reports $100M Loss in Q3 2021

UPDATED Nov. 13, 2021, 5:00 a.m.: Compass’ loss ballooned to $100 million in the third quarter from $13.5 million a year ago as operating expenses jumped.

The brokerage reported earning more than $1.7 billion in revenue for the third quarter, a 47 percent increase year over year, but operating expenses grew to more than $1.8 billion, up 53 percent from a year earlier.

The brokerage’s net loss for the period was almost $100 million, compared with $13.5 million during the same period last year.

Compass reported its third quarter earnings Wednesday afternoon just after the market closed with its shares trading at $12.04. The stock dropped 64 cents in the first hour following the release.

But Compass’ C-suite sees the numbers very differently. “Exceptional” and “outstanding” were some of the words CEO Robert Reffkin and CFO Kristen Ankerbrandt used to describe the company’s third quarter performance.

“Compass is in the strongest position we’ve ever been in,” said Reffkin, pointing to the brokerage’s revenue gains and the company’s internal measure of profits through adjusted EBITDA, which showed a $12 million gain. That excludes more than $71 million in stock-based compensation expenses and a $21 million legal charge in connection with the company’s litigation with tech entrepreneur Avi Dorfman and his company RentJolt.

Dorfman sued Compass in 2014, alleging that the company had built its proprietary software off his company RentJolt and then cut him out of a stake that he was entitled to as a veritable founder. The $21 million charge pertains to a “settlement in principle” according to documents filed with the U.S. Securities and Exchange Commission, and is in addition to an undisclosed amount previously set aside by Compass to account for future liabilities including the Dorfman lawsuit.

“We are pleased to have resolved this dispute in a manner that is satisfactory to both sides,” a Compass spokesperson said in a statement to The Real Deal. “We acknowledge Mr. Dorfman’s work in the early days of Compass as a founding team member of the company.”

Compass’ share price is down 40 percent since its initial public offering in April.

Oppenheimer analyst Jason Helfstein, who has maintained a buy rating on the company since the IPO, asked Reffkin and Ankerbrandt if they would consider a stock buyback or cutting back more aggressively on operating expenses.

Ankerbrandt said there were no plans for such measures.

“We remain very confident in our strategy here,” she said. “But we are open-minded and always evaluating different alternatives.”

The firm’s headcount grew by 987 principal agents to a total of 11,616 by the end of the quarter. The brokerage also launched operations in five new markets, bringing its total markets to 67.