Compass(COMP) - 2025 Q2 - Quarterly Results

Q2 2025 Performance Overview Compass achieved record Q2 2025 results with ten all-time highs, outperforming the market in transaction growth and agent retention, demonstrating strong financial and operational performance Executive Summary Compass, Inc. reported record second-quarter 2025 results, achieving ten all-time highs including market share, revenue, GAAP Net Income, and Adjusted EBITDA. The company significantly outperformed the market in transaction growth and agent retention, demonstrating a strong value proposition and positioning for future growth as the market normalizes - Compass achieved its best quarterly results in history, marked by ten all-time highs, including market share, Revenue, GAAP Net Income, Adjusted EBITDA, Adjusted EBITDA Margin, Free Cash Flow, T&E revenue, T&E attach, and weekly agent sessions on the platform[1] - The company added a record 832 principal agents organically in Q2, the highest quarter for principal agent adds in its history, coupled with a 97.5% quarterly principal agent retention rate[1] - Compass outperformed the market for 17 consecutive quarters, with organic transactions growing by 6.3% and total transactions by 20.9% year-over-year, compared to a 0.9% decline in market transactions[1] Financial Highlights In Q2 2025, Compass achieved substantial financial growth, with revenue increasing by 21.1% and GAAP Net Income surging by 90.3% year-over-year. The company also generated record positive operating and free cash flows, indicating strong financial health and operational efficiency Q2 2025 Key Financial Metrics (YoY Growth) | Metric | Q2 2025 Value | YoY Growth | Source Chunk | | :----------------------- | :-------------- | :--------- | :----------- | | Revenue | $2.06 billion | 21.1% | 5 | | GAAP Net Income | $39.4 million | 90.3% | 5 | | Adjusted EBITDA | $125.9 million | 63% | 5 | | Operating Cash Flow | $72.8 million | N/A | 5 | | Free Cash Flow | $68.0 million | N/A | 5 | - The Christie's International Real Estate acquisition contributed 10.4% of the revenue growth in Q2 2025, with organic revenue growth up 8.7% year-over-year[5] - GAAP Net Income for Q2 2025 included non-cash stock-based compensation expense of $55.2 million and depreciation and amortization of $29.4 million[5] Operational Highlights Compass demonstrated significant operational strength in Q2 2025, achieving record market share and substantial growth in principal agents and transactions. The company's proprietary technology platform also saw increased engagement and successful new product rollouts, enhancing agent productivity and client services Q2 2025 Key Operational Metrics (YoY Growth) | Metric | Q2 2025 Value | YoY Growth | Source Chunk | | :-------------------------- | :-------------- | :--------- | :----------- | | Quarterly Market Share | 6.09% | +96 bps | 9 | | Organic Market Share Growth | N/A | +40 bps | 9 | | Principal Agents | 20,965 | 23.3% | 9 | | Total Transactions | 73,025 | 20.9% | 9 | | Organic Transactions | N/A | 6.3% | 9 | | Gross Transaction Value (GTV) | $78.3 billion | 20.3% | 9 | | Organic GTV | $69.3 billion | N/A | 9 | - The Compass end-to-end proprietary technology platform reached an all-time high of 24 average weekly sessions per agent in Q2, up 37% year-over-year[9] - Key product highlights include: Compass Make-Me-Sell (16,770 entries), Compass One-Click Title & Escrow (2x higher attach rate for users), Compass One (used with 116,000 clients), and Compass Reverse Prospecting (115% growth in transactions using it quarter-over-quarter)[9] Business Outlook Compass provided a positive outlook for Q3 and full year 2025, projecting revenue and Adjusted EBITDA ranges, and reiterating its commitment to free cash flow positivity Q3 2025 Outlook Compass provided a positive outlook for Q3 2025, projecting revenue between $1.725 billion and $1.850 billion, and Adjusted EBITDA in the range of $60 million to $80 million Q3 2025 Outlook | Metric | Q3 2025 Outlook | | :------------- | :-------------- | | Revenue | $1.725B - $1.850B | | Adjusted EBITDA | $60M - $80M | Full Year 2025 Outlook For the full year 2025, Compass updated its Non-GAAP OPEX guidance, reflecting a reduction from the prior range, and reiterated its expectation to be free cash flow positive Full Year 2025 Outlook | Metric | Full Year 2025 Outlook | | :---------------- | :--------------------- | | Non-GAAP OPEX | $1.010B - $1.020B | - The updated Non-GAAP OPEX range reflects a reduction from the prior range of $1.017 billion to $1.042 billion, including $10 million from 2024 M&A, $105 million from the Christie's International Real Estate acquisition, and $12 million from other acquisitions[8][10] - Compass expects to be free cash flow positive for the full year 2025[10] Company Information & Disclosures This section details the Q2 2025 conference call, outlines the company's disclosure practices, provides a safe harbor statement for forward-looking information, defines non-GAAP financial measures, and offers a brief company overview and contact information Conference Call & Disclosure Compass held a conference call on July 30, 2025, to discuss its Q2 2025 results and outlook, with access provided via its Investor Relations website. The company utilizes various channels, including its IR website, SEC filings, press releases, and social media, to disclose material information to investors - A conference call was held on Wednesday, July 30, 2025, at 5:00 p.m. ET to discuss Q2 2025 results and outlook, accessible via the Compass Investor Relations website[12] - Compass uses its Investor Relations website (https://investors.compass.com) as a primary channel for disclosing material information, in addition to SEC filings, press releases, public conference calls, webcasts, and various social media platforms[14] Safe Harbor Statement The press release includes forward-looking statements based on estimates and assumptions, which are subject to various risks and uncertainties. These risks include general economic conditions, real estate industry health, interest rates, litigation, and the company's ability to innovate, compete, and integrate acquisitions, among others. Actual results may differ materially from these statements - Forward-looking statements in the press release, including future performance and financial results, are based on estimates and assumptions and are subject to risks and uncertainties[15] - Key risks include general economic conditions, the health of the U.S. real estate industry, high mortgage interest rates, ongoing antitrust litigation, decreases in commission income, low home inventory levels, and the ability to attract and retain agents[15] - Investors are advised to review 'Risk Factors' in the company's Form 10-K and 10-Q reports for more information on factors that could adversely affect the business[17] Non-GAAP Financial Measures Compass presents non-GAAP financial measures such as Adjusted EBITDA, non-GAAP OPEX, free cash flow, and organic revenue growth to supplement GAAP statements. These measures are used for performance assessment, budgeting, and communication, providing a more consistent overview of operations, but should not be considered in isolation from GAAP results - Non-GAAP measures presented include Adjusted EBITDA, non-GAAP OPEX, free cash flow, and organic revenue growth, used for performance assessment, budgeting, and investor communication[18] - These non-GAAP measures have limitations as analytical tools and should be considered alongside GAAP measures like net income (loss), GAAP OPEX, operating cash flows, and revenue[18] - Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are provided in the financial statement tables within the press release[19] About Compass Compass, founded in 2012, is a leading tech-enabled real estate services company and the largest residential real estate brokerage in the U.S. by sales volume. It provides an integrated, cloud-based platform to empower agents and includes Christie's International Real Estate, a global luxury brand - Compass is a leading tech-enabled real estate services company and the largest residential real estate brokerage in the United States by sales volume[20] - The company provides an end-to-end proprietary platform with integrated cloud-based software for CRM, marketing, client service, and brokerage functions, custom-built for the real estate industry[20] - The Compass network includes Christie's International Real Estate, a premier global luxury real estate brand with over 100 independently owned brokerage Affiliates in 50 countries and territories[20] Investor & Media Contacts Contact information for investor relations and media inquiries is provided for Soham Bhonsle and Rory Golod, respectively - Investor Contact: Soham Bhonsle (soham.bhonsle@compass.com)[21] - Media Contact: Rory Golod (rory@compass.com)[21] Condensed Consolidated Financial Statements This section presents the company's financial position, operational performance, and cash flow activities through condensed consolidated balance sheets, statements of operations, and statements of cash flows Condensed Consolidated Balance Sheets The balance sheet shows an increase in total assets from $1,178.0 million at December 31, 2024, to $1,596.1 million at June 30, 2025, primarily driven by increases in intangible assets and goodwill. Total liabilities also increased, with a notable rise in commissions payable and the revolving credit facility Condensed Consolidated Balance Sheets (in millions) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :-------------- | :---------------- | | Assets | | | | Cash and cash equivalents | $177.3 | $223.8 | | Accounts receivable, net | $96.9 | $48.6 | | Intangible assets, net | $221.1 | $73.8 | | Goodwill | $474.2 | $233.6 | | Total assets | $1,596.1 | $1,178.0 | | Liabilities | | | | Commissions payable | $154.3 | $82.8 | | Revolving credit facility | $50.0 | — | | Total liabilities | $870.7 | $765.6 | | Stockholders' Equity | | | | Total stockholders' equity | $725.4 | $412.4 | Condensed Consolidated Statements of Operations For the three months ended June 30, 2025, Compass reported significant revenue growth and a positive net income attributable to Compass, Inc., a substantial improvement from the prior year. Operating expenses also increased, particularly commissions and other related expenses Condensed Consolidated Statements of Operations (in millions, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $2,059.6 | $1,700.6 | $3,415.8 | $2,754.7 | | Commissions and other related expense | $1,685.7 | $1,405.3 | $2,791.8 | $2,267.6 | | Total operating expenses | $2,020.2 | $1,679.3 | $3,430.1 | $2,865.5 | | Income (loss) from operations | $39.4 | $21.3 | $(14.3) | $(110.8) | | Net income (loss) attributable to Compass, Inc. | $39.4 | $20.7 | $(11.3) | $(112.2) | | Net income (loss) per share, basic | $0.07 | $0.04 | $(0.02) | $(0.23) | | Total stock-based compensation expense | $55.2 | $30.9 | $85.6 | $63.8 | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash provided by operating activities increased significantly compared to the prior year, while investing activities resulted in a substantial net cash outflow due to payments for acquisitions. Financing activities provided net cash, primarily from drawdowns on the revolving credit facility Condensed Consolidated Statements of Cash Flows (in millions) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $95.9 | $53.6 | | Net cash used in investing activities | $(181.9) | $(26.5) | | Net cash provided by (used in) financing activities | $39.5 | $(8.2) | | Net (decrease) increase in cash and cash equivalents | $(46.5) | $18.9 | | Cash and cash equivalents at end of period | $177.3 | $185.8 | - Payments for acquisitions, net of cash acquired, totaled $172.0 million for the six months ended June 30, 2025, significantly impacting investing activities[27] - Financing activities included $70.0 million in proceeds from drawdowns on the Revolving credit facility and $20.0 million in repayments[27] Non-GAAP Reconciliations This section provides detailed reconciliations of non-GAAP financial measures, including Adjusted EBITDA, Free Cash Flow, and Non-GAAP Operating Expenses, to their most directly comparable GAAP counterparts Reconciliation of Net Income (Loss) to Adjusted EBITDA Adjusted EBITDA for Q2 2025 significantly increased to $125.9 million, up from $77.4 million in Q2 2024. This reconciliation adjusts GAAP net income by adding back non-cash expenses like depreciation, amortization, stock-based compensation, and other non-operating items Reconciliation of Net Income (Loss) to Adjusted EBITDA (in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) attributable to Compass, Inc. | $39.4 | $20.7 | $(11.3) | $(112.2) | | Depreciation and amortization | $29.4 | $21.4 | $58.2 | $42.2 | | Stock-based compensation | $55.2 | $30.9 | $85.6 | $63.8 | | Restructuring costs | $2.7 | $4.3 | $11.9 | $5.8 | | Adjusted EBITDA | $125.9 | $77.4 | $141.5 | $57.3 | - Acquisition-related expenses for Q2 2025 included a $2.7 million gain related to changes in the fair value of contingent consideration[28] - The six months ended June 30, 2024, included a $57.5 million litigation charge related to Antitrust Lawsuits[28] Reconciliation of Operating Cash Flows to Free Cash Flow Free cash flow for Q2 2025 was $68.0 million, an increase from $40.4 million in Q2 2024. This is calculated by subtracting capital expenditures from net cash provided by operating activities Reconciliation of Operating Cash Flows to Free Cash Flow (in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $72.8 | $45.0 | $95.9 | $53.6 | | Less: Capital expenditures | $(4.8) | $(4.6) | $(8.4) | $(7.3) | | Free cash flow | $68.0 | $40.4 | $87.5 | $46.3 | Reconciliation of GAAP Operating Expenses to Non-GAAP Operating Expenses This reconciliation adjusts GAAP operating expenses by excluding stock-based compensation and certain acquisition-related expenses or litigation charges to arrive at non-GAAP operating expenses. Non-GAAP figures show the underlying operational costs more clearly Reconciliation of GAAP Operating Expenses to Non-GAAP Operating Expenses (in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Sales and marketing | | | | | | GAAP Sales and marketing | $96.4 | $94.9 | $188.1 | $188.3 | | Non-GAAP Sales and marketing | $87.6 | $86.6 | $172.5 | $172.1 | | Operations and support | | | | | | GAAP Operations and support | $109.3 | $83.1 | $206.0 | $162.1 | | Non-GAAP Operations and support | $102.3 | $78.7 | $194.3 | $154.0 | | Research and development | | | | | | GAAP Research and development | $63.4 | $47.4 | $113.3 | $94.4 | | Non-GAAP Research and development | $38.0 | $32.2 | $75.0 | $64.3 | | General and administrative | | | | | | GAAP General and administrative | $33.3 | $22.9 | $60.8 | $105.1 | | Non-GAAP General and administrative | $22.0 | $19.9 | $43.5 | $38.2 | - Stock-based compensation is a significant adjustment across all operating expense categories, totaling $55.2 million for Q2 2025[32] - Acquisition-related expenses of $2.7 million were excluded from GAAP Operations and support for Q2 2025[32] Non-GAAP Operating Expenses Excluding Commissions and Other Related Expense This table provides a quarterly breakdown of non-GAAP operating expenses, excluding commissions and other related expenses, showing a trend of increasing operational costs from Q1 2024 to Q2 2025 Non-GAAP Operating Expenses Excluding Commissions and Other Related Expense (in millions) | Metric | March 31, 2024 | June 30, 2024 | September 30, 2024 | December 31, 2024 | March 31, 2025 | June 30, 2025 | | :-------------------------- | :------------- | :------------ | :----------------- | :---------------- | :------------- | :------------ | | Sales and marketing | $85.5 | $86.6 | $80.4 | $84.7 | $84.9 | $87.6 | | Operations and support | $75.3 | $78.7 | $80.2 | $79.6 | $92.0 | $102.3 | | Research and development | $32.1 | $32.2 | $32.9 | $33.6 | $37.0 | $38.0 | | General and administrative | $18.3 | $19.9 | $21.5 | $26.5 | $21.5 | $22.0 | | Total non-GAAP operating expenses excluding commissions and other related expense | $211.2 | $217.4 | $215.0 | $224.4 | $235.4 | $249.9 |