Compass Inc (COMP, Financial), the largest residential real estate brokerage in the United States, released its financial results for the third quarter ended September 30, 2023, on November 6, 2023. Despite a challenging market environment, the company reported positive free cash flow for the second consecutive quarter and a significant improvement in net loss compared to the same period in 2022.
Financial Performance
In Q3 2023, Compass Inc (COMP, Financial) reported a 10% year-over-year decrease in revenue to $1.34 billion, driven by a 12% decline in transactions due to macroeconomic factors. Despite the revenue decline, the company's GAAP net loss improved by 74% from a net loss of $154 million in Q3 2022 to $39 million in Q3 2023. This net loss includes non-cash stock-based compensation expenses of $38 million and depreciation and amortization of $21 million.
Adjusted EBITDA, a non-GAAP measure, was $22 million in Q3 2023, compared to $(42) million in Q3 2022, representing an improvement of $64 million. The company also reported operating cash flow of $15 million and positive free cash flow of $12 million, considering capital expenditures. As of the end of Q3 2023, the company had cash and cash equivalents of $220 million, with no draw of its revolving credit facility.
Operational Highlights
Despite the challenging market conditions, Compass Inc (COMP, Financial) managed to increase its national market share by 26 basis points year-over-year to 4.4% in Q3 2023. The company also reported a 4% increase in the average number of principal agents from Q3 2022, reaching 14,055 for Q3 2023. However, total transactions closed by Compass agents declined by 12% compared to Q3 2022, reflecting the overall decline in the U.S. residential real estate market.
Outlook
For Q4 2023, Compass Inc (COMP, Financial) expects revenue to be between $1.1 billion and $1.2 billion, with an adjusted EBITDA of negative $35 million to negative $20 million. The company also targets a non-GAAP operating expense range of $850-$950 million for FY 2023.
Despite the current market challenges, Compass Inc (COMP, Financial) remains confident in its ability to grow and continue investing in its technology platform while maintaining a lower cost base and improving agent retention.
Explore the complete 8-K earnings release (here) from Compass Inc for further details.
