Core Insights - The article highlights a significant increase in foreign purchases of second-hand homes in the U.S., particularly by Chinese buyers, who account for 15% of these transactions. The median purchase price for Chinese buyers is $759,600, which is 90% higher than the national median price of $403,100 [2][10]. Group 1: Foreign Purchases Overview - Foreign purchases of second-hand homes in the U.S. surged by 40% year-on-year, reaching 78,100 units, marking the highest growth rate in 15 years [3]. - Despite the increase, foreign buyers represent only 2% of total second-hand home sales in the U.S. [3]. - The median price of second-hand homes in the U.S. is $422,400, which has increased by 40% compared to four years ago [5]. Group 2: Chinese Buyers' Behavior - Chinese buyers are the largest group among foreign purchasers, with a median purchase price significantly higher than the national average [9][10]. - Approximately 70% of Chinese buyers purchase homes in cash, avoiding loans [10]. - The motivations for Chinese buyers include obtaining permanent residency visas and providing housing for children studying in the U.S. [9]. Group 3: Market Dynamics and Regulations - The high home prices and elevated mortgage rates have made it increasingly difficult for average American buyers to purchase homes, creating opportunities for wealthy foreign buyers [5][8]. - As of August 20, 2023, 54 state-level bills restricting foreign ownership of real estate have been passed across 30 states in the U.S. [11]. - In 2025 alone, 133 bills aimed at limiting foreign real estate purchases have been proposed, indicating a growing trend towards regulation in this area [13].

Core Insights - A notable luxury home in Cherry Hills Village sold for $9.8 million, leading August home sales in the Denver metro area [2] - The property features extensive amenities, including a bowling alley, indoor swim spa, and a regulation-size tennis court, indicating a trend towards high-end, amenity-rich homes [3] Sales Overview - The home at 5650 E. Stanford Drive was purchased for its list price on August 11 by Dragons Buddha Trust, highlighting a competitive luxury market [4] - Other significant sales in the Denver area for August include: - 1860 E. Cedar Ave. sold for $8.4 million, featuring modern design elements and extensive outdoor spaces [6][7] - 1110 E. Layton Ave. in Cherry Hills Village sold for $8 million, purchased by a financial investment company [10][11] - 9650 S. Cougar Road in Littleton sold for $6 million, showcasing large acreage and luxury features [15] - 45 S. Bellaire St. in Denver sold for $5.7 million, indicating strong demand in the Hilltop neighborhood [18]

Financial Data and Key Metrics Changes - The company's EBITDA under management for Q2 2025 was approximately BRL 6 billion, slightly below the previous year [4] - A negative net income of about BRL 1 billion was reported for the quarter [5] - Net debt remained stable compared to 2025, with a stable debt service coverage ratio [5][10] - The average cost of debt decreased slightly from CDI plus 90 basis points to CDI plus 88 basis points, with an average duration of 6.2 years [10] Business Line Data and Key Metrics Changes - In Humu, higher transported volumes led to increased EBITDA, along with a rise in market share at the Port of Santos due to lower tariffs [6] - Compass experienced growth in its portfolio, with higher sales in the residential segment contributing to better margins and increased volume traded by Edge [7] - Move saw a reduction in volumes sold due to a fire incident in February, but recovery efforts are ongoing [8] - Hadar maintained stable EBITDA compared to 2024, despite divesting from its lending portfolio [9] - Raising reported positive results in fuel distribution with improved margins, although faced delays in sugarcane crushing due to adverse weather conditions [9] Market Data and Key Metrics Changes - The company noted an increase in market share for Move, recovering significantly after the fire incident [25] - Compass is expected to continue generating cash and potentially pay good dividends in the future [48] Company Strategy and Development Direction - The company is focused on recovery and ensuring regulatory processes are followed, particularly for Move [17] - There is an emphasis on maintaining a high-quality portfolio while managing debt levels [26][28] - The company is exploring options for divestitures and reducing debt, with ongoing discussions about monetizing certain assets [28][30] Management's Comments on Operating Environment and Future Outlook - Management highlighted the importance of customer base preservation for future competitiveness [25] - The company is optimistic about the recovery trajectory and is working on operational efficiencies [19] - There is a sense of urgency to find strategic partners and address capital structure issues, particularly for Raizen [36][37] Other Important Information - The company is not disclosing specific guidance on dividends but acknowledges Compass's strong cash generation potential [48] - The insurance claims process is ongoing, and the company is optimistic about future monetization [54] Q&A Session Summary Question: Impact of insurance on Move's results - Management confirmed that over BRL 400 million was accounted for in the regulation process, with ongoing recovery efforts [17][18] Question: Debt service coverage ratio dynamics - Management acknowledged that some debt has a bullet structure, affecting cash payments in the quarter, and indicated a potential reduction in the debt service coverage ratio moving forward [20][21] Question: Volume dynamics post-fire at Move - Management emphasized the focus on preserving the distributor network and noted a considerable recovery in market share [25] Question: Priorities for divestitures and debt reduction - Management reiterated that priorities have not changed, and they are focused on maintaining a balanced portfolio while addressing debt levels [26][28] Question: Strategic partner for Raizen - Management expressed interest in bringing in a strategic partner aligned with their and Shell's strategy, emphasizing the need for capital [36][37] Question: Future dividend expectations for Compass and Move - Management stated that while Compass is expected to generate good dividends, it is too early to discuss Move's dividend potential [48]

[Special Note Regarding Forward-Looking Statements](index=4&type=section&id=Special%20Note%20Regarding%20Forward-Looking%20Statements) This section provides important cautionary information about forward-looking statements and associated risks [PART I. FINANCIAL INFORMATION](index=6&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This part presents Compass, Inc.'s unaudited condensed consolidated financial statements and management's discussion and analysis [Item 1. Financial Statements (unaudited)](index=6&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents Compass, Inc.'s unaudited condensed consolidated financial statements for the periods ended June 30, 2025, and December 31, 2024, including balance sheets, statements of operations, stockholders' equity, and cash flows, along with detailed notes on business operations, accounting policies, acquisitions, debt, and other financial disclosures [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific dates | Metric | June 30, 2025 (in millions) | December 31, 2024 (in millions) | | :----------------------------------- | :-------------------------- | :-------------------------- | | Total assets | $1,596.1 | $1,178.0 | | Total liabilities | $870.7 | $765.6 | | Total stockholders' equity | $725.4 | $412.4 | - Total assets increased by **$418.1 million (35.5%)** from December 31, 2024, to June 30, 2025, primarily due to increases in intangible assets and goodwill, reflecting recent acquisitions[19](index=19&type=chunk) - Total liabilities increased by **$105.1 million (13.7%)** over the same period, driven by higher commissions payable and revolving credit facility utilization[19](index=19&type=chunk) - Total stockholders' equity significantly increased by **$313.0 million (75.9%)** from December 31, 2024, to June 30, 2025[19](index=19&type=chunk) [Condensed Consolidated Statements of Operations](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section details the company's financial performance over specific periods, including revenue, expenses, and net income | Metric | Three Months Ended June 30, 2025 (in millions) | Three Months Ended June 30, 2024 (in millions) | Six Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2024 (in millions) | | :----------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Revenue | $2,059.6 | $1,700.6 | $3,415.8 | $2,754.7 | | 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) | - Revenue increased by **21.1%** for the three months and **24.0%** for the six months ended June 30, 2025, compared to the prior year periods[21](index=21&type=chunk) - Net income attributable to Compass, Inc. for the three months ended June 30, 2025, was **$39.4 million**, up from **$20.7 million** in the prior year, while the six-month period still showed a net loss of **$11.3 million**, a significant improvement from a **$112.2 million** loss in the prior year[21](index=21&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This section outlines changes in the company's equity, including capital contributions and accumulated earnings or losses | Metric | June 30, 2025 (in millions) | December 31, 2024 (in millions) | | :----------------------------------- | :-------------------------- | :-------------------------- | | Additional paid-in capital | $3,403.4 | $3,081.6 | | Accumulated deficit | $(2,683.5) | $(2,672.2) | | Total Compass, Inc. stockholders' equity | $719.9 | $409.4 | - Additional paid-in capital increased by **$321.8 million** for the six months ended June 30, 2025, primarily due to **$250.1 million** in share consideration for the Christie's International Real Estate acquisition and **$89.7 million** in stock-based compensation[27](index=27&type=chunk) - The accumulated deficit increased slightly by **$11.3 million** for the six months ended June 30, 2025, reflecting the net loss for the period[27](index=27&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section details the sources and uses of cash from operating, investing, and financing activities over specific periods | Cash Flow Activity | Six Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2024 (in millions) | | :----------------------------------- | :------------------------------------------- | :------------------------------------------- | | 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 | - Net cash provided by operating activities increased to **$95.9 million** for the six months ended June 30, 2025, from **$53.6 million** in the prior year, despite a net loss, due to non-cash adjustments[29](index=29&type=chunk)[188](index=188&type=chunk)[189](index=189&type=chunk) - Net cash used in investing activities significantly increased to **$181.9 million**, primarily due to **$172.0 million** in payments for acquisitions, net of cash acquired, for the six months ended June 30, 2025[29](index=29&type=chunk)[190](index=190&type=chunk)[191](index=191&type=chunk) - Net cash provided by financing activities was **$39.5 million**, a reversal from a net cash outflow of **$8.2 million** in the prior year, driven by net proceeds from the Revolving Credit Facility and Concierge Facility[29](index=29&type=chunk)[192](index=192&type=chunk)[193](index=193&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and additional information supporting the condensed consolidated financial statements [1. Business and Basis of Presentation](index=12&type=section&id=1.%20Business%20and%20Basis%20of%20Presentation) This note describes the company's operations and the foundational principles used in preparing the financial statements - Compass, Inc. operates an end-to-end platform for residential real estate agents, offering cloud-based software for CRM, marketing, and client service, enhanced by proprietary data, analytics, AI, and machine learning[31](index=31&type=chunk) - The company primarily generates revenue from commissions paid by clients at the time of home transactions, with adjacent services like title, escrow, and franchise services comprising a smaller portion[32](index=32&type=chunk) [2. Summary of Significant Accounting Policies](index=12&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the key accounting principles and estimation methods applied in the preparation of the financial statements - The preparation of financial statements involves significant management judgments and estimates, particularly for fair value of acquired assets, contingent consideration, useful lives of assets, impairment, and income taxes[36](index=36&type=chunk)[37](index=37&type=chunk) - Business combinations are accounted for using the acquisition method, allocating purchase consideration to acquired assets and liabilities at fair value, with any excess recorded as goodwill[38](index=38&type=chunk) - The company operates as a single operating and reportable segment, with the CEO evaluating financial information on a consolidated basis[39](index=39&type=chunk)[40](index=40&type=chunk) - Recently adopted accounting pronouncements include ASU 2023-07 (Segment Reporting) and ASU 2023-09 (Income Taxes), with ASU 2024-03 (Disaggregation of Income Statement Expenses) currently being assessed for future impact[43](index=43&type=chunk)[44](index=44&type=chunk)[45](index=45&type=chunk)[46](index=46&type=chunk) [3. Acquisitions](index=14&type=section&id=3.%20Acquisitions) This note details the company's recent business acquisitions, including purchase consideration, goodwill, and intangible assets - On January 13, 2025, Compass acquired Christie's International Real Estate for **$153.0 million** in cash and **44.1 million** shares of Class A common stock (fair value estimated at **$250.1 million**), expanding into luxury real estate franchising[47](index=47&type=chunk)[49](index=49&type=chunk)[51](index=51&type=chunk) - The acquisition resulted in **$230.0 million** in goodwill and **$164.1 million** in identified intangible assets (trademarks, acquired technology, agent networks, affiliate network)[51](index=51&type=chunk) - Other acquisitions during the six months ended June 30, 2025, included a residential real estate brokerage and a title insurance and escrow settlement business, involving **$23.6 million** in cash and contingent consideration[57](index=57&type=chunk) Pro Forma Information (Six Months Ended June 30) | Metric | Actuals (Jan 13 - Jun 30, 2025) | Pro Forma (Six Months Ended Jun 30, 2025) | Pro Forma (Six Months Ended Jun 30, 2024) | | :---------------- | :------------------------------ | :---------------------------------------- | :---------------------------------------- | | Revenue | $274.2 million | $3,424.0 million | $3,001.9 million | | Net income (loss) | $10.0 million | $(17.0) million | $(117.9) million | [4. Fair Value of Financial Assets and Liabilities](index=17&type=section&id=4.%20Fair%20Value%20of%20Financial%20Assets%20and%20Liabilities) This note describes the valuation methodologies and classifications for the company's financial assets and liabilities - Cash and cash equivalents (**$177.3 million** as of June 30, 2025) are classified as Level 1 financial instruments, valued using quoted prices in active markets[62](index=62&type=chunk) - Contingent consideration liabilities (**$30.8 million** as of June 30, 2025) are classified as Level 3 financial instruments, estimated using Monte-Carlo simulations with unobservable inputs[62](index=62&type=chunk)[64](index=64&type=chunk) [5. Debt](index=17&type=section&id=5.%20Debt) This note provides details on the company's debt instruments, including revolving credit facilities, interest rates, and covenants - The Concierge Facility, a **$75.0 million** revolving credit facility, was extended to July 31, 2027, and is used to finance the Compass Concierge Program, bearing interest at term SOFR plus **2.50%** (**7.24%** as of June 30, 2025)[65](index=65&type=chunk)[66](index=66&type=chunk)[67](index=67&type=chunk) - The Revolving Credit Facility provides **$350.0 million**, with **$50.0 million** outstanding and **$33.3 million** in letters of credit as of June 30, 2025, bearing interest at SOFR plus **1.50%** (**5.81%** as of June 30, 2025)[70](index=70&type=chunk)[71](index=71&type=chunk)[73](index=73&type=chunk) - The company was in compliance with all financial covenants for both facilities as of June 30, 2025, including maintaining at least **$150.0 million** in liquidity and meeting consolidated revenue thresholds[68](index=68&type=chunk)[75](index=75&type=chunk) [6. Commitments and Contingencies](index=19&type=section&id=6.%20Commitments%20and%20Contingencies) This note outlines the company's legal obligations, pending lawsuits, and other potential financial liabilities - Compass settled the Gibson and Umpa antitrust cases nationwide for **$57.5 million**, with final approval granted in October 2024, resolving claims against the company and its agents[79](index=79&type=chunk)[86](index=86&type=chunk) - Several other antitrust lawsuits (March, Friedman, QJ Team, Peiffer, Grace, Fierro, Whaley, Batton II) are pending, with some stayed pending the appeal of the Gibson/Umpa settlement[80](index=80&type=chunk)[81](index=81&type=chunk)[82](index=82&type=chunk)[83](index=83&type=chunk)[84](index=84&type=chunk)[85](index=85&type=chunk)[87](index=87&type=chunk) - The company is contingently liable for **$33.3 million** under letters of credit and **$364.5 million** in escrow and trust deposits as of June 30, 2025[89](index=89&type=chunk)[90](index=90&type=chunk) [7. Preferred Stock and Common Stock](index=21&type=section&id=7.%20Preferred%20Stock%20and%20Common%20Stock) This note describes the company's capital structure, including the number of shares issued and the voting rights of different stock classes - As of June 30, 2025, Compass had **523,306,435** shares of common stock issued and outstanding, comprising Class A (**513,184,002** shares) and Class C (**10,122,433** shares)[93](index=93&type=chunk) - Class A common stock carries one vote per share, Class B has no voting rights, and Class C common stock carries twenty votes per share, convertible to Class A under certain conditions[94](index=94&type=chunk)[95](index=95&type=chunk) [8. Stock-Based Compensation](index=22&type=section&id=8.%20Stock-Based%20Compensation) This note details the expense recognized for equity awards, including RSUs, and the remaining unrecognized compensation - Total stock-based compensation expense was **$55.2 million** for the three months and **$85.6 million** for the six months ended June 30, 2025, an increase from **$30.9 million** and **$63.8 million** in the prior year periods, respectively[105](index=105&type=chunk) - As of June 30, 2025, unrecognized stock-based compensation expense totaled **$327.6 million**, expected to be recognized over a weighted-average period of **2.3 years**[105](index=105&type=chunk) - The company issued **40.8 million** RSUs during the six months ended June 30, 2025, and reverted to a four-year ratable vesting schedule for new equity commitments starting in 2025[103](index=103&type=chunk)[104](index=104&type=chunk) [9. Income Taxes](index=24&type=section&id=9.%20Income%20Taxes) This note explains the company's income tax provisions, including benefits recognized and the valuation allowance on deferred tax assets - The company recognized an income tax benefit of **$3.1 million** for the six months ended June 30, 2025, primarily from a partial reduction in the valuation allowance related to the Christie's International Real Estate acquisition[107](index=107&type=chunk) - A full valuation allowance is maintained on all domestic net deferred tax assets due to factors including estimated future taxable income and historic profitability[108](index=108&type=chunk) [10. Net Income (Loss) Per Share Attributable to Compass, Inc.](index=25&type=section&id=10.%20Net%20Income%20(Loss)%20Per%20Share%20Attributable%20to%20Compass,%20Inc.) This note presents the calculation of basic and diluted earnings per share, reflecting the company's profitability on a per-share basis Net Income (Loss) Per Share Attributable to Compass, Inc. | 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 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic EPS | $0.07 | $0.04 | $(0.02) | $(0.23) | | Diluted EPS | $0.07 | $0.04 | $(0.02) | $(0.23) | - Basic and diluted EPS improved significantly year-over-year, with a positive **$0.07** for the three months ended June 30, 2025, compared to **$0.04** in the prior year, and a reduced loss of **$(0.02)** for the six-month period compared to **$(0.23)**[21](index=21&type=chunk)[112](index=112&type=chunk) - Weighted-average shares used in diluted EPS calculation for the three months ended June 30, 2025, included **13.1 million** incremental shares related to the Christie's International Real Estate acquisition's Share Consideration[112](index=112&type=chunk)[113](index=113&type=chunk) [11. Compass Concierge Receivables and Allowance for Credit Losses](index=26&type=section&id=11.%20Compass%20Concierge%20Receivables%20and%20Allowance%20for%20Credit%20Losses) This note describes the Concierge Program, its associated receivables, and the allowance for potential credit losses - The Compass Concierge Program offers services (Concierge Classic) and a loan program (Concierge Capital) to home sellers, with repayment due upon home sale, listing termination, or one year[115](index=115&type=chunk)[116](index=116&type=chunk)[117](index=117&type=chunk) - Concierge Receivables, net of allowance for credit losses (ACL), were **$38.3 million** as of June 30, 2025, with **96%** related to unsold properties[19](index=19&type=chunk)[117](index=117&type=chunk)[120](index=120&type=chunk) Allowance for Credit Losses (ACL) Activity (in millions) | Metric | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :---------------- | :------------------------------- | :----------------------------- | | Beginning of period | $10.3 | $10.4 | | Allowances | $0.1 | $0.2 | | Net write-offs | $(0.1) | $(0.3) | | End of period | $10.3 | $10.3 | [12. Restructuring Activities](index=27&type=section&id=12.%20Restructuring%20Activities) This note details the costs and objectives of the company's restructuring efforts, aimed at improving efficiency and profitability - Restructuring costs for the six months ended June 30, 2025, totaled **$11.9 million**, more than doubling from **$5.8 million** in the prior year, primarily due to **$5.7 million** in severance-related personnel costs and **$6.2 million** in lease termination costs[124](index=124&type=chunk) - These activities are part of a broader plan to improve organizational alignment, drive cost efficiencies, and move towards profitability and positive free cash flow[123](index=123&type=chunk) - Future lease and lease-related payments for restructuring activities are estimated at **$35.6 million**, with **$6.5 million** due in the remainder of 2025[124](index=124&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on Compass, Inc.'s financial condition and operational results, highlighting revenue growth driven by agent expansion and acquisitions, alongside detailed analysis of operating expenses, key business metrics, and liquidity. It also addresses the impact of macroeconomic conditions and industry changes [OVERVIEW](index=29&type=section&id=OVERVIEW) This section provides a high-level summary of the company's business model, market position, and recent strategic developments - Compass is a leading tech-enabled real estate services company, operating the largest brokerage in the U.S. by sales volume across **38 states** and Washington D.C., with approximately **37,700 agents**[129](index=129&type=chunk)[137](index=137&type=chunk) - The company acquired Christie's International Real Estate in January 2025, expanding into the global luxury real estate franchise sector[129](index=129&type=chunk)[131](index=131&type=chunk) - Revenue is primarily generated from gross sales commissions, with integrated services (title, escrow, mortgage) and the affiliate business representing smaller but growing portions[132](index=132&type=chunk) - The Compass platform, launched in February 2025, provides an end-to-end, AI-powered solution for agents and a client-facing dashboard (Compass One) for consumers[134](index=134&type=chunk)[135](index=135&type=chunk) [Operational Highlights for the Three Months Ended June 30, 2025](index=30&type=section&id=Operational%20Highlights%20for%20the%20Three%20Months%20Ended%20June%2030,%202025) This section presents key operational metrics for the quarter, demonstrating growth in transactions, value, and agent count Operational Highlights (Three Months Ended June 30) | Metric | 2025 | 2024 | Change (YoY) | | :----------------------- | :----- | :----- | :----------- | | Total Transactions | 73,025 | 60,390 | +20.9% | | Gross Transaction Value | $78.3B | $65.0B | +20.3% | | Number of Principal Agents | 20,965 | 16,997 | +23.3% | | U.S. Residential Real Estate Market Share | 6.09% | 5.13% | +0.96 pp | - Growth in Total Transactions, Gross Transaction Value, and Number of Principal Agents was primarily driven by recent acquisitions of residential real estate brokerages[138](index=138&type=chunk)[139](index=139&type=chunk)[174](index=174&type=chunk) [Seasonality and Cyclicality](index=31&type=section&id=Seasonality%20and%20Cyclicality) This section discusses how seasonal patterns and broader economic cycles influence the company's real estate business - The residential real estate market is seasonal, with highest transaction volume in spring and summer, leading to lower revenue in the first and fourth quarters[142](index=142&type=chunk) - The broader real estate industry is cyclical, influenced by economic conditions, interest rates, and mortgage lending standards, directly impacting the company's revenue growth rate[143](index=143&type=chunk) [Impact of the Macroeconomic Conditions and Recent Industry Practice Changes on the U.S. Residential Real Estate Market and Our Business](index=31&type=section&id=Impact%20of%20the%20Macroeconomic%20Conditions%20and%20Recent%20Industry%20Practice%20Changes%20on%20the%20U.S.%20Residential%20Real%20Estate%20Market%20and%20Our%20Business) This section analyzes the effects of high interest rates, new industry regulations, and cost reduction strategies on the company's operations - High interest rates and Federal Reserve policies have slowed the U.S. residential real estate market, leading to reduced consumer demand, declining affordability, and low inventory[144](index=144&type=chunk) - NAR's class action settlement introduced industry-wide practice changes, effective August 2024, including prohibiting buyer broker compensation in MLS listings and requiring written buyer-agent agreements[145](index=145&type=chunk) - Significant cost reduction actions since 2022 have enabled consistent positive operating cash flow, mitigating the impact of market slowdowns and industry changes[146](index=146&type=chunk) [RESULTS OF OPERATIONS](index=32&type=section&id=RESULTS%20OF%20OPERATIONS) This section provides a detailed analysis of the company's financial performance, including revenue and expense trends [Comparison of the Three and Six Months Ended June 30, 2025 and 2024](index=33&type=section&id=Comparison%20of%20the%20Three%20and%20Six%20Months%20Ended%20June%2030,%202025%20and%202024) This section compares the company's financial results for the current and prior year periods, highlighting key drivers of change Revenue (in millions) | Period | 2025 | 2024 | $ Change | % Change | | :----------------------- | :------- | :------- | :------- | :------- | | Three Months Ended June 30 | $2,059.6 | $1,700.6 | $359.0 | 21.1% | | Six Months Ended June 30 | $3,415.8 | $2,754.7 | $661.1 | 24.0% | - Revenue growth was primarily driven by an increase in the number of agents on the platform, including those from businesses acquired since April 2024[148](index=148&type=chunk) Operating Expenses (in millions) | Expense Category | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :----------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Commissions and other related expense | $1,685.7 | $1,405.3 | $2,791.8 | $2,267.6 | | Sales and marketing | $96.4 | $94.9 | $188.1 | $188.3 | | Operations and support | $109.3 | $83.1 | $206.0 | $162.1 | | Research and development | $63.4 | $47.4 | $113.3 | $94.4 | | General and administrative | $33.3 | $22.9 | $60.8 | $105.1 | | Restructuring costs | $2.7 | $4.3 | $11.9 | $5.8 | | Depreciation and amortization | $29.4 | $21.4 | $58.2 | $42.2 | - Commissions and other related expense increased in absolute dollars due to higher revenue, but decreased as a percentage of revenue (**81.8%** vs **82.6%** for Q2) due to more favorable agent commission splits from recent acquisitions[149](index=149&type=chunk) - General and administrative expense decreased by **42.2%** for the six months ended June 30, 2025, primarily due to a **$57.5 million** litigation charge in the prior year, partially offset by acquisition-related transaction expenses and assumed costs[154](index=154&type=chunk)[156](index=156&type=chunk) - Depreciation and amortization increased by **37.4%** (QoQ) and **37.9%** (YoY) due to higher amortization of intangible assets from recent acquisitions[158](index=158&type=chunk) [KEY BUSINESS METRICS AND NON-GAAP FINANCIAL MEASURES](index=38&type=section&id=KEY%20BUSINESS%20METRICS%20AND%20NON-GAAP%20FINANCIAL%20MEASURES) This section presents crucial operational and non-GAAP financial metrics used to assess the company's performance and efficiency Key Business Metrics | 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 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total Transactions | 73,025 | 60,390 | 122,146 | 98,839 | | Gross Transaction Value (in billions) | $78.3 | $65.0 | $130.7 | $105.1 | | Number of Principal Agents | 20,965 | 16,997 | 20,965 | 16,997 | | Net income (loss) attributable to Compass, Inc. (in millions) | $39.4 | $20.7 | $(11.3) | $(112.2) | | Net income (loss) attributable to Compass, Inc. margin | 1.9% | 1.2% | (0.3%) | (4.1%) | | Adjusted EBITDA (in millions) | $125.9 | $77.4 | $141.5 | $57.3 | | Adjusted EBITDA margin | 6.1% | 4.6% | 4.1% | 2.1% | - Total Transactions increased by **20.9%** (QoQ) and **23.6%** (YoY), primarily due to acquired brokerages[169](index=169&type=chunk) - Gross Transaction Value increased by **20.3%** (QoQ) and **24.3%** (YoY), driven by an increased number of agents on the platform[172](index=172&type=chunk) - Adjusted EBITDA significantly improved to **$125.9 million** (QoQ) and **$141.5 million** (YoY), with margins of **6.1%** and **4.1%** respectively, driven by higher revenue from agent growth[166](index=166&type=chunk)[180](index=180&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=42&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section evaluates the company's ability to meet its short-term and long-term financial obligations and fund operations - As of June 30, 2025, Compass had **$177.3 million** in cash and cash equivalents and an accumulated deficit of **$2.7 billion**[185](index=185&type=chunk) - The company generated **$95.9 million** in cash flow from operations for the six months ended June 30, 2025[185](index=185&type=chunk) - Compass has a **$350.0 million** Revolving Credit Facility, with **$50.0 million** outstanding and **$266.7 million** available to be drawn as of June 30, 2025, and was in compliance with all covenants[185](index=185&type=chunk) - Off-balance sheet arrangements include **$364.5 million** in escrow and trust deposits, for which the company is contingently liable[194](index=194&type=chunk) [CRITICAL ACCOUNTING ESTIMATES AND POLICIES](index=45&type=section&id=CRITICAL%20ACCOUNTING%20ESTIMATES%20AND%20POLICIES) This section highlights accounting policies requiring significant management judgment and estimation, impacting financial reporting - No material changes to critical accounting policies and estimates were disclosed from the 2024 Form 10-K[197](index=197&type=chunk) - Business combinations are accounted for using the acquisition method, requiring estimates for fair value allocation of acquired assets and liabilities, with any excess recorded as goodwill[198](index=198&type=chunk) [RECENT ACCOUNTING PRONOUNCEMENTS](index=45&type=section&id=RECENT%20ACCOUNTING%20PRONOUNCEMENTS) This section refers to new accounting standards and their potential impact on the company's financial statements - Refer to Note 2 of the condensed consolidated financial statements for details on recently adopted and newly issued accounting pronouncements[200](index=200&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=45&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section outlines Compass, Inc.'s exposure to market risks, primarily focusing on interest rate fluctuations and foreign currency exchange rates, and the strategies employed to manage these risks [Interest Rate Risk](index=45&type=section&id=Interest%20Rate%20Risk) This section assesses the company's exposure to fluctuations in interest rates on its cash holdings and variable-rate debt - The company's cash and cash equivalents (**$177.3 million** as of June 30, 2025) are primarily in short-term interest-earning instruments, limiting exposure to fair value changes from interest rate fluctuations[202](index=202&type=chunk) - Debt facilities (Concierge Facility and Revolving Credit Facility) bear variable interest rates (SOFR-based), but a **100-basis point** change in market rates is not expected to materially impact interest expense due to current outstanding balances[203](index=203&type=chunk) [Foreign Currency Exchange Risk](index=46&type=section&id=Foreign%20Currency%20Exchange%20Risk) This section evaluates the company's exposure to currency fluctuations given its U.S. dollar functional currency and limited foreign operations - The company's functional and reporting currency is the U.S. dollar, with most revenue denominated in USD, resulting in limited foreign currency risk on sales[204](index=204&type=chunk) - Operating expenses are primarily in local currencies (U.S., Europe, UK, India, Canada), but significant foreign currency balances are not maintained, limiting exchange rate fluctuation exposure[204](index=204&type=chunk) [Item 4. Controls and Procedures](index=46&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the evaluation of Compass, Inc.'s disclosure controls and procedures, confirming their effectiveness as of June 30, 2025, while noting the exclusion of a recently acquired entity from the internal control assessment scope [Evaluation of Disclosure Controls and Procedures](index=46&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's disclosure controls, with a note on the scope of internal control assessment - The CEO and CFO concluded that disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2025[207](index=207&type=chunk) - The assessment of internal control over financial reporting for the recently acquired At World Properties Holdings, LLC was omitted, representing approximately **4%** of consolidated assets and **8%** of consolidated revenue[206](index=206&type=chunk) [Changes in Internal Control over Financial Reporting](index=46&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) This section confirms that no material changes occurred in the company's internal control over financial reporting - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[208](index=208&type=chunk) [Inherent Limitation on the Effectiveness of Internal Control over Financial Reporting and Disclosure Controls and Procedures](index=46&type=section&id=Inherent%20Limitation%20on%20the%20Effectiveness%20of%20Internal%20Control%20over%20Financial%20Reporting%20and%20Disclosure%20Controls%20and%20Procedures) This section acknowledges the inherent limitations of control systems, which provide reasonable but not absolute assurance - Management acknowledges that control systems provide only reasonable, not absolute, assurance against errors and fraud due to inherent limitations like faulty judgments, simple errors, circumvention, and resource constraints[209](index=209&type=chunk) [PART II. OTHER INFORMATION](index=47&type=section&id=PART%20II.%20OTHER%20INFORMATION) This part includes disclosures on legal proceedings, risk factors, equity sales, and other significant corporate information [Item 1. Legal Proceedings](index=47&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to the detailed information on legal proceedings, including antitrust litigation, provided in Note 6 to the condensed consolidated financial statements - Information regarding legal proceedings is incorporated by reference from Note 6 to the condensed consolidated financial statements[210](index=210&type=chunk) [Item 1A. Risk Factors](index=47&type=section&id=Item%201A.%20Risk%20Factors) This section updates the risk factors from the 2024 Form 10-K, specifically adding a new risk related to recent changes in U.S. tariff policies and their potential adverse effects on the business - No material changes to risk factors from the 2024 Form 10-K, except for the addition of a new risk concerning the adverse effects of recent changes in U.S. tariff policies[211](index=211&type=chunk) - Changes in U.S. tariff policies, retaliatory tariffs, and trade tensions could disrupt supply chains, increase housing construction costs, and reduce transaction volume, materially affecting the business[212](index=212&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Securities](index=47&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds%20Securities) This section details unregistered sales of Class A common stock between April 1, 2025, and August 4, 2025, primarily for acquisition-related earnout and holdback payments - Issued **398,939** shares of Class A common stock on June 23, 2025, for earnout and holdback amounts from a prior acquisition[214](index=214&type=chunk) - Issued **78,238** shares of Class A common stock on July 30, 2025, for holdback amounts from a prior acquisition[215](index=215&type=chunk) - Issued **109,725** shares of Class A common stock on August 1, 2025, for a real estate brokerage acquisition, with potential future issuances up to **245,137** shares for earnout and holdback[216](index=216&type=chunk) - These issuances were exempt from registration under Section 4(a)(2) of the Securities Act[217](index=217&type=chunk) [Item 3. Defaults Upon Senior Securities](index=47&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section states that there were no defaults upon senior securities during the reported period - No defaults upon senior securities were reported[218](index=218&type=chunk) [Item 4. Mine Safety Disclosures](index=48&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section indicates that there are no mine safety disclosures to report - No mine safety disclosures were reported[219](index=219&type=chunk) [Item 5. Other Information](index=48&type=section&id=Item%205.%20Other%20Information) This section covers an amendment to the Concierge Facility, the appointment and compensation arrangements for the new Chief Financial Officer, and a new Rule 10b5-1 trading arrangement for the General Counsel - The Concierge Facility was amended and extended on August 1, 2025, through July 31, 2027, with updated interest rates[220](index=220&type=chunk) - Scott Wahlers was appointed Chief Financial Officer, effective August 22, 2025, with an annual base salary of **$500,000**, a target cash bonus of **$500,000**, and a one-time RSU award valued at **$2.5 million**[221](index=221&type=chunk)[222](index=222&type=chunk) - Brad Serwin, General Counsel, adopted a new Rule 10b5-1 trading arrangement to sell up to approximately **949,532** shares of common stock, ending August 11, 2027[224](index=224&type=chunk) [Item 6. Exhibits](index=49&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including amendments to credit agreements, executive offer letters, certifications, and XBRL documents - Includes Amendment No. 2 to the Second Amended and Restated Revolving Credit and Security Agreement, and the Offer Letter for Scott Wahlers[226](index=226&type=chunk) - Certifications of Principal Executive Officer and Principal Financial Officer are furnished as Exhibits 32.1 and 32.2[226](index=226&type=chunk)[227](index=227&type=chunk)

Core Points - CoStar is suing Zillow for allegedly using tens of thousands of its copyrighted photographs to enhance its online rental listings business [1][4] - CoStar claims that Zillow displayed nearly 47,000 copyrighted images, profiting from them while many images included CoStar's watermark [1][4] - The lawsuit highlights that Zillow's misconduct extends beyond its own websites, as it distributes CoStar's images through syndication agreements with competitors like Realtor.com and Redfin [4] Company Actions - CoStar has invested billions to create a comprehensive real estate information database and claims to have the world's largest library of real estate photographs [5] - The company employs thousands of professional photographers who have produced millions of copyrighted images [5] Legal Context - This lawsuit against Zillow is the second legal challenge the company has faced in a short period, following a lawsuit from real estate brokerage Compass [7] - Compass is seeking an injunction against Zillow to change its practices and is also pursuing monetary damages [8] Market Presence - Zillow has a substantial market presence with approximately 160 million homes in its database and receives 227 million unique visitors monthly [10] - The company recorded 2.4 billion visits between January and March [10]

Inventory & Market Trends - Nationwide inventory has returned to pre-pandemic levels, reaching a 6-year high [1] - New developments are more desirable due to their move-in ready and turnkey nature [2] - The Northeast market is performing better due to lower supply compared to the rest of the country [2] - Florida has experienced a significant shift, with 8% fewer transactions compared to the previous year [2] - Nine states have experienced year-over-year price decreases [3] Rental Market - Overall, the rental market is in a better position [3] - Rental prices in New York have increased by 7% year-over-year due to the fair act, which shifted rental commissions from renters to landlords [3][4]

Market Trends & Inventory - Nationwide, single-family home inventory is up 27%, and total inventory (including condos) is up 16% [3] - 42% of homes on the market have experienced a price drop, the highest in 12 years, indicating increased negotiability for buyers [3] - Northeast market is performing better due to lower supply, while Florida is experiencing a significant shift with 8% fewer transactions year-over-year [6] - Nine states have seen year-over-year price decreases, including Texas, reflecting a shift from COVID-era migration patterns [6] Rental Market - Overall, rental prices are performing better, with year-over-year decreases in some areas [7] - New York City rentals are up 7% year-over-year due to the fair act shifting rental commissions to landlords [7] Affordability & Policy - The discussion revolves around increasing affordability in New York City, with the CEO advocating for increased supply through incentivizing developers and landlords to build more [8][10] - Austin's example is cited, where increased inventory led to a 15% decrease in prices year-over-year [11] - Converting commercial properties to residential and easing building restrictions are proposed solutions for New York City [12] - A mayoral candidate's policies are perceived to have a modest negative impact on market sentiment and sales [14] Compass's Performance - Compass reported record earnings, including record EBITDA, free cash flow, EBITDA margin, market share, revenue, agent recruiting, and platform usage [2] - The company has experienced 17 consecutive quarters of organic growth faster than the market [2] Legal & Competitive Landscape - Compass is suing Zillow on behalf of agents and home sellers, alleging monopolistic practices related to listing requirements and referral fees [16][17]

Financial Data and Key Metrics Changes - Compass achieved record quarterly results with a revenue increase of 21.1% year over year, reaching $2.06 billion in Q2 2025 [21][24] - Adjusted EBITDA rose to $126 million, a 63% increase from $77 million in the same quarter last year, marking a new all-time high [5][24] - GAAP net income improved by 90% to $39.4 million compared to $20.7 million a year ago, also a record for quarterly GAAP net income [24] - Free cash flow reached $68 million, up from $40.4 million in Q2 2024, setting a new record for quarterly free cash flow [24][25] Business Line Data and Key Metrics Changes - Total transactions increased by 20.9%, with organic transactions up 6.3%, significantly outperforming the overall market where transactions decreased by 0.9% [5][21] - Title and escrow revenue reached an all-time high, with attach rates improving by nearly 700 basis points year over year [9][10] - Principal agent retention improved to 97.5%, with 832 gross principal agents recruited, a 53% increase year over year [6][21] Market Data and Key Metrics Changes - Market share increased to 6.09%, up 96 basis points from the previous year [22] - Gross transaction value was $78.3 billion, reflecting a 20.3% increase year over year [22] Company Strategy and Development Direction - The company aims to manage operating expenses prudently, recruit and retain agents, build a productive platform, pursue accretive M&A, and grow high-margin businesses [14][28] - The M&A pipeline is larger than ever, indicating strong demand for Compass in a challenging housing market [8][10] - The company is focusing on leveraging AI to enhance its platform and improve operational efficiency [15][16] Management's Comments on Operating Environment and Future Outlook - Management noted that the current housing market remains challenging, but Compass has achieved record results, indicating strong demand for its services [4][8] - The company anticipates that competitors will be more adversely affected by market conditions due to their lack of capital and resources [8][10] - Management expressed confidence in the long-term strategy and the ability to generate significant adjusted EBITDA and free cash flow for shareholders [14][29] Other Important Information - The company announced the promotion of Scott Wallers to CFO following Kalani Reelitz's departure [18][20] - The integration of recent acquisitions is progressing well, with expectations for improved profitability in 2026 [28][29] Q&A Session Summary Question: Clarification on the $50 million benefit for next year - Management indicated that the $50 million benefit is expected to be a run-rate savings that will improve profitability and remain sustainable over time [34][36] Question: Industry shifts and future operational rules - Management discussed the ongoing tension between choice and control in the industry, emphasizing the need for sellers to have more marketing choices [38][40] Question: Changes in execution due to industry actions - Management confirmed that demand remains high and that Compass agents continue to gain market share despite industry challenges [49][50] Question: Appetite for acquisitions - Management expressed confidence in their capital position and indicated a strong interest in pursuing acquisitions [55][56] Question: Feedback on the Compass One dashboard - Management reported strong feedback on the Compass One dashboard, noting that it is transforming agent workflows and enhancing client transparency [63][64] Question: Update on July market trends - Management noted that July showed healthy signs with a 5% year-over-year increase in contract listings, reflecting delayed demand from the spring market [91][92]

Financial Data and Key Metrics Changes - In Q2 2025, the company achieved record revenue of $2.06 billion, a 21.1% increase year-over-year, marking the highest quarterly revenue in its history [20][24] - Adjusted EBITDA reached $126 million, up 63% from $77 million in the same quarter last year, also a record high [5][24] - GAAP net income was $39.4 million, a 90% increase from $20.7 million a year ago, representing another record [24] - Free cash flow improved to $68 million from $40.4 million in Q2 2024, setting a new record for quarterly free cash flow [24] Business Line Data and Key Metrics Changes - Total transactions increased by 20.9%, with organic transactions up 6.3%, significantly outperforming the overall market where transactions declined by 0.9% [5][20] - Title and escrow revenue reached an all-time high, with attach rates for the title function nearing 75% for users of the one-click title feature [9][10] - The company successfully recruited 832 gross principal agents, a 53% increase year-over-year, marking the best recruiting quarter in its history [6][20] Market Data and Key Metrics Changes - Market share increased to 6.09%, up 96 basis points year-over-year and 8 basis points from Q1 [21] - Gross transaction value was $78.3 billion, reflecting a 20.3% increase from the previous year [21] Company Strategy and Development Direction - The company aims to manage operating expenses prudently, recruit and retain agents, build a productive platform, pursue accretive M&A, and grow high-margin businesses [13][27] - The company is focusing on leveraging AI to enhance its platform, aiming for a seamless integration of tools for agents [14][15] - The M&A pipeline is larger than ever, indicating strong demand for the company's services even in a challenging housing market [8][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to outperform competitors, particularly in a slowing housing market [8][10] - The management highlighted the importance of advocating for agents and providing them with more choices, contrasting with the control exerted by portals and MLSs [7][39] - The company anticipates continued growth in revenue and adjusted EBITDA, with a focus on maintaining operational efficiencies [26][27] Other Important Information - The company has achieved over $600 million in operating expense savings over the last three years, with a disciplined growth rate of 3% to 4% [12][27] - The CFO, Kalani Rielitz, announced his departure, with Scott Wallers being promoted to CFO [17][19] Q&A Session Summary Question: Thoughts on the $50 million benefit for next year - Management indicated that the $50 million benefit is expected to be a run rate savings, improving profitability and remaining sustainable over time [34][36] Question: Industry shifts and future operations - Management noted a tug-of-war in the industry between choice and control, emphasizing the need for sellers to have more choices in marketing their homes [38][39] Question: Changes in execution due to industry actions - Management confirmed that demand remains high and that the private exclusives strategy has not changed significantly, with agents gaining market share [49][50] Question: Appetite for acquisitions - Management expressed confidence in their capital position and indicated a strong interest in pursuing acquisitions, driven by the current industry environment [56][57] Question: Feedback on platform engagement and agent dashboard - Management reported strong feedback on the Compass One dashboard, noting that it is transforming agents' workflows and increasing transparency for clients [65][66] Question: Update on macro conditions in July - Management observed healthy trends in July, with pending contracts up 5% year-over-year, reflecting delayed demand from the spring market [93][94]

2Q 2025 Business Update & Supplementary Information | 2Q 2025 | 2Q 2025 | 2Q 2025 | 2Q 2025 | | --- | --- | --- | --- | | Revenue | Adjusted EBITDA(1) | Adjusted EBITDA Margin(1) | Free Cash Flow(1) | | $2,059.6M | $125.9M | 6.1% | $68.0M | | +21% Y-o-Y | +$48.5M Y-o-Y | +150 BPS Y-o-Y | +$27.6M Y-o-Y | | 2Q 2025 | 2Q 2025 | 2Q 2025 | 2Q 2025 | | GAAP Net Income | Number of Principal Agents(2) | Gross Principal Agent | Market Share(4) | | | | Additions(3) | | | $39.4M | 20,965 | 832 | 6.09% | | +90% Y-o-Y | ...