Compass, Inc.

Ladies and gentlemen, thank you for joining us and welcome to Compass, Inc.' 's first quarter 2025 earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please raise your hand using the bar at the bottom of your screen and please unmute yourself when speaking. If you have dialed in to today's call, please press star nine to raise your hand and star six to unmute. I will now hand the conference over to Compass's head of investor relations, Soham Bosele. Please go ahead.

Thank you very much, Operator, and good afternoon, everybody. And thank you for joining the Compass First Quarter 2025 Earnings Call. Joining us today will be Robert Refkin, our founder and CEO, and Kalani Ruletz, our Chief Financial Officer. In discussing your company's performance, we will refer to some non-GAAP measures. You can find the reconciliation of these non-GAAP measures to the most directly comparable GAAP measures in our First Quarter 2025 earnings release posted on our investor relations website. We will make forward looking statements that are based on our current expectations, forecasts and assumptions and involve risks and uncertainties. These statements include our guidance for the second quarter of 2025 and full year 2025, including comments related to our expected financial results, operating expenses and free cash flow, as well as our expectations for operational achievements. Our actual results may differ materially from these statements. You can find more information about risks, uncertainties, and other factors that could affect the results in our most recent annual report on Form 10-K and quarterly reports on Form 10-Q filed with the SEC and available on our investor relations website. You should not place undue reliance on any forward-looking statements. All information in this presentation is as of today's date, May 8th. We expressly disclaim any obligation to update this information. I will now turn the call over to Robert Refkin. Robert?

Thank you for joining us today for our first quarter conference call. I'm pleased to share that in the first quarter, the gap between Compass and the industry continued to widen. In Q1, we produced record adjusted EBITDA, increased market share to record levels, grew agent count to record levels, grew the title and escrow business to record levels, retained agents at industry leading levels extended our unique inventory advantage and generated another order of positive free cash flow. Revenue in the first quarter increased by 28.7% year over year. Total transactions in organic transactions increased by 27.8% and 7.3% year over year respectively. As compared to the overall market where transactions decreased by 2.1%. So this means Compass's total transaction count outpaced the market by close to 30% and Compass's organic transaction count outpaced the market by 9%. In Q1 2025, we generated record Q1 adjusted EBITDA of $16 million, up from the negative $20 million in the year-ago quarter. Both our Q1 revenue and adjusted EBITDA came within our stated guidance ranges. In the quarter, we also successfully recruited 700 gross principal agents organically to Compass, which is up 35% year-over-year and represents one of our highest recruiting quarters for principals. Our recruiting results this quarter illustrate that Compass's value proposition is resonating better than ever in the marketplace. Quarterly principal agent retention grew by 30 basis points year-over-year to a solid 96.6% in Q1. Momentum in our title and escrow business was strong, with attach rates up 695 basis points year over year. And during the quarter, we also closed the Christie's International Real Estate Acquisition, which as a reminder, allows us to empower a completely new segment of the market, namely independent brokerages and broker owner entrepreneurs across both the U.S. and international markets. Kalani will touch on our progress on synergies in the business, but I'm excited to share that in the two and a half months since close, we have already announced that four new affiliates have joined the network. And I am pleased to report that our financial results and integration efforts are tracking ahead of plan. Revenue less commissions and other related expenses as a percentage of revenue in the fourth quarter was 18.4%. which is above the 17.5% reported in Q4 and above the 18.2% pro forma figure inclusive of the Christie's International business in Q4. Non-GAAP OpEx was $235 million in Q1, which includes part of the Christie's International acquisition. But more importantly, we remain on track to achieve organic OpEx goal of 3 to 4% growth for the year. Our ability to control OpEx even while delivering significant top-line growth illustrates that OpEx management has become a core competency of Compass. And as we've said previously, our OpEx discipline is not temporary and is a permanent part of our strategy. Now, before I dive into our long-term strategy, I would like to address NAR's decision to maintain clearance operation in late March. First, we continue to strongly and unequivocally believe in homeowner choice. I don't know a homeowner who would say they want NAR, the MLS, or a portal to tell them how they must market their home. Amidst all the negative narratives and the scare tactics, the one thing you aren't going to hear is the voice of the party that is impacted the most here, the homeowner. So let me share the voice of the homeowner. After hearing about the benefits of pre-marketing, which include testing price, no days on market no price drop history building a buyer interest list no algorithmic valuations lower than the list price on the listing page no leads diverted to third-party agents that don't know the property the question homeowners ask us is what is the downside and so what is the downside there is no downside the worst thing that happens is a homeowner gets an offer and they have an opportunity to turn it down and go to the public sites with the benefit of price discovery from pre-marketing. That's the downside, which means there is no downside. You don't have to take an offer. You can always just reject the offer and go to the public sites with the benefit of pre-marketing. And that's the reason why nearly half of our clients in Q1, nearly 20,000 homeowners, chose to go through the Compass three-phase marketing strategy. because there is no downside. It's just that simple. Second, I want to make clear that under NAR's updated policy as well as Zillow's new policy, office exclusives or what we have termed them as Compass private exclusives are still permitted. Third, Compass was founded to help agents grow their business and better serve their clients. And the Compass three-phase marketing strategy helps agents grow their business and better serve their clients. And that's why it will only continue to grow over time. Lastly, it's important to recognize that Compass didn't make up the concept of private exclusives. Homeowners have been asking agents across brokerages and across markets for off MLS options for decades. Compass just responded to homeowner demand in a national, systematic, tech forward way and made off MLS marketing options available to all homeowners through the Compass platform. Again, this isn't about what Compass wants. It's about what homeowners want. Homeowners want more choice, not less choice. And Compass believes in homeowner choice. It's hard for me to see a scenario where over time choice doesn't win. However, portals and MLSs are now using their dominance to discourage sellers from testing off MLS marketing options. similar to how incumbents in other industries such as cable and music tried to raise switching costs. In both industries, the incumbents tried to block change by making it harder to leave, but that strategy only made consumers more aware of their dissatisfaction and sped up the shift off their platforms. The same is now happening in real estate. MLSs and portals are raising friction to discourage homeowners and listing agents from marketing off MLS. But that resistance is increasing the migration to off MLS alternatives because it's making listing agents increasingly question the risks of MLS exposure for their clients, which are days on market, price drop history, diverted buyer inquiries, valuation estimates less than the value of the house, and ultimately, This is creating less trust with the people that give these platforms their inventory. Agents aren't stupid. If you need to find them and ban them to keep them on your platform, then clearly there is something wrong with your platform. As a result, I expect over the next year to see more private listings than ever before, which will only extend Compass's inventory advantage. Now, I'd like to wrap up my comments with an overview of our long-term strategy. At its core, our strategy remains unchanged and includes, first and foremost, controlling our organic objects at 3 to 4 percent annual growth, even as transactions recover from 4 million existing home sales for the past two years back to the 5.4 to 5.6 million mid-cycle level. We believe Compass is one of the best ways for public market investors to participate in that recovery. Secondly, Compass will continue to outgrow the market by adding agents organically, by executing accretive M&A, and by using the Compass platform to enhance agent productivity. Starting with organic growth, we believe there's a long runway of incredibly talented agents that we'd love to see at Compass. On M&A, with roughly 80% of the U.S. markets generating less than $10 billion in GTV last year, and only 22 brokerages generating more than $10 billion in GTV, there is a significant amount of fragmentation that exists in the brokerage market today. Our M&A pipeline remains healthy today, and as a reminder, we continue to target brokerages within the four to six times EBITDA multiple range. Next, we will expand margins by increasing attach of title, escrow, and mortgage, while also growing the Christie's International Real Estate Affiliate business long-term, with a longer-term opportunity to stack other higher margin revenue streams, such as home insurance, home warranty, move-in services, home improvement, leasing data. In our T&E business, we are seeing evidence that we can more than double our unit economics for brokerage transaction as we integrate the business further into our platform using features such as one-click title. Here are some illustrative unit economics to consider. First, our T&E business can generate $5,000 of revenue per transaction compared to the $25,000 of revenue per transaction for a brokerage transaction on an ASP of $1 million. But given that we are targeting an adjusted EBITDA margin of 25 to 30% on each T&E transaction long term, the adjusted EBITDA contribution can actually be in line with that of a brokerage transaction over time, despite the lower revenue contribution. Said another way, attaching a T&E transaction to a brokerage transaction can almost double our unit economics. Second, in addition to attaching more T&E, we also operate a mortgage JV with guaranteed rate where longer term we are targeting adjusted EBITDA margins in the 25% range at scale. Operating our mortgage business through a JV structure means that we don't recognize any revenue in the P&L, but the bottom line contribution can in many cases be higher than a T&E transaction because of how much revenue we earn per transaction. Lastly, our affiliate opportunity is a new long tail opportunity that we believe can help us both expand into new markets in a capital light manner and be highly accretive to our adjusted EBITDA margins as we expand the network. As we stated last quarter, we believe we can more than 5X the number of domestic Christie's International real estate affiliates over time. And as a reminder, the business generates a 30 to 35% adjusted EBITDA margin for us. And so bringing it all together, we believe that by sticking to our core strategy alone, we can generate hundreds and hundreds of millions and adjusted EBITDA means free cash flow for our shareholders over time. And our results over the last few quarters are showing this ramp. Also, as we have discussed in the past, we believe we can leverage our structural advantages to create increasing network effects that drive our strategy and includes our platform, our national scale, our network of top agents, and depth of inventory in local markets. Now, let me hand it over to Kalani to go through our financials in more detail.