KEY INSIGHTS

  • Compass posted nearly $1.75 billion in third-quarter earnings
  • The company is just the ninth publicly traded company on the U.S. stock market owned by a Black founder
  • Compass’ growth comes as another real estate tech giant, Zillow, hits choppy waters

Compass, a tech-enabled real estate company that went public in April, posted nearly $1.75 billion in third-quarter earnings on Wednesday, up 47 percent year over year but slightly less than its $2 billion earnings last quarter.


The company, founded in 2012,  is only the ninth publicly traded company on the U.S. stock market owned by a Black founder.


The pandemic has had a yo-yo effect on the housing market in the U.S. The beginning of the pandemic saw housing costs plummet, but they soon rebounded as the demand for housing outpaced supply — and demand has not slowed.


“There's new demand coming from Millennials entering the market and foreign buyers returning to the market as COVID-related travel restrictions ease,” Kristen Ankerbrandt, CFO of Compass, said in a call to shareholders Wednesday. “Americans continue to express an interest in moving homes as remote work creates new flexibility.”


Compass has recently been on a shopping spree. The company announced acquisitions of two reputable title companies in September. They picked up Denver-based First Alliance Title and CommonGround Abstract, based in Pennsylvania and New Jersey. Compass will now provide closing services in nine states including California, Colorado, Florida, Washington State, Maryland, Virginia, Washington D.C. and Texas. 


Expanding into title and escrow services is just one of the ways Compass is growing. The company is planning on writing its first mortgages starting in Q4’21 and has begun hiring loan officers and is licensed to operate in six states so far.


While Compass expands its business model, another real estate tech giant has been hitting choppy waters.


Zillow reported net losses of $328 million on Q3’21 earnings. The company has lost $1.4 billion since 2019 from its house-flipping algorithm going haywire. As a result, 25 percent of the Seattle-based company’s staff has been laid off and, as of last week, the company’s stock had plunged 32 percent from its typical range.


Conversely, Compass continues to grow. The company launched in five new markets in the third quarter, including Kansas City, Missouri, Hartford, Connecticut and Durham, North Carolina, bringing its total market count to 67. 


Yet all this expansion comes with a cost. In the third quarter, Compass had a net loss of $100 million, due to increased stock-based compensation and a one-time litigation charge. According to Ankerbrandt, Compass was initially expecting a loss of $45 million to $85 million for full year 2021, but now projects a loss of $5 million to $25 million. The company expects to be profitable in 2022.


“We are more than just a brokerage,” Robert Reffkin, CEO of Compass, said on the call with shareholders. “Yes, I'm proud that we have built one of the fastest growing brokerages in the country. But our strategy is to be much more than that and I believe the key to creating a long-term sustainable financial advantage is our platform.”