Compass, Inc.

Hello, everyone. Thank you for joining us and welcome to the Compass Inc. 2025 Q4 earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. To withdraw your question, press star 1 again. I would now like to turn our call over to Soham Bonslay, Head of Investor Relations. Please go ahead.

Thank you very much, Operator. And good afternoon, everybody. And thank you for joining the Compass fourth quarter 2025 earnings call. Joining us today will be Robert Refkin, our founder and CEO, and Scott Wallers, our chief financial officer. In discussing our 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 fourth quarter 2025 earnings release posted on our investor relations website. Any discussion regarding organic revenue, organic op-ex, organic transactions, or organic GTV excludes activity from businesses we acquired since October 1, 2024. 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 first quarter of 2026, the recently closed Anywhere transaction, and full year 2026 and beyond, including comments related to 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 our results in the most recent annual report on Form 10-K 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, February 26th. We expressly disclaim any obligation to update this information. I will now turn the call over to Robert Refkin. Robert?

Good afternoon, and thank you for joining us for our fourth quarter conference call. I am thrilled to speak with you today for the first time as CEO and chairman of our newly combined company, which serves 340,000 real estate professionals and over 2,000 franchise broker owners across 120 countries and territories. On today's call, I will be discussing five topics. First, I will provide a quick recap of our record Q4 in 2025 results. Second, I'll discuss the historic Rocket Redfin partnership we just announced and how it significantly expands home seller choice and provides extraordinary value to our real estate professionals. Third, I'll touch on our four sustainable financial advantages. Fourth, an update on our integration and cost synergy efforts. And I'll end by touching on AI and why I believe it will become a structural tailwind for our business. Starting with our Q4 results. In Q4, Compass delivered record fourth quarter revenue of $1.7 billion. delivered record fourth quarter adjusted EBITDA of $58 million. Both our revenue and adjusted EBITDA came in above the high end of our guide. We also delivered record fourth quarter adjusted EBITDA margin, delivered the best organic principal agent recruiting quarter for Q4, as we added 830 principal agents. The Compass platform hit a Q4 record of 20 average weekly sessions per agent. We grew our Q4 title and escrow revenue to record levels. We grew our mortgage JV earnings to record Q4 levels. And lastly, we grew our title and escrow attach in our legacy markets to all-time highs in Q4. 2025 was also a record year for Compass as we generated approximately $7 billion in revenue, surpassing our prior peak of $6.4 billion in 2021, when the housing market was approximately 50% above current levels of annualized home sales. We generated adjusted EBITDA of $293 million, which was the highest ever in our history, and we produced operating cash flow of $217 million, which is also an all-time high for the company. None of these results would have been possible without each and every member of the Compass team. I want to sincerely thank the entire team for their maniacal execution and unwavering hard work in what has been, by any objective measure, one of the toughest housing markets in a generation. Now, let me touch on the unprecedented step we took today to ensure home seller choice through our partnership with Rocket Redfin. At Compass, we firmly believe that home sellers deserve the right to freely market their home when, where, and how they want. We also believe that home sellers should also have the right to publicly market their listings without negative insights such as days on market and price drop history, amongst others. Currently, however, the Zillow ban forces home sellers to give them their listings within 24 hours of publicly marketing a property, even if they don't want to be on Zillow, and places negative insights such as days on market and price drop history on all listings. This is just wrong. Home sellers should have the freedom to publicly market their home wherever and however they want, without the fear of being banned off a platform. The Rocket Redfin partnership we announced today stands up for home seller choice as it provides homeowners the flexibility in how they introduce their homes to the market and does not subject homeowners to any negative insights for listings off Zillow. There are four highly accreted pillars to this partnership. First, our agents will have the opportunity to receive 1.2 million high intent leads from Redfin.com and Rockin Mortgage over the course of our three year strategic alliance. The partnership is also structured in a way to provide us with an increase in lead flow in each of the three years with potential upside in year three, depending on conversion rates. Second, our unique inventory will be on Redfin.com. with all leads on these listings routed directly to our listing agents across all of our brands, including but not limited to Add Properties, Better Homes and Gardens Real Estate, Century 21, Christie's International Real Estate, Coldwell Banker, Compass, Corcoran, ERA, and Sotheby's International Realty. This will supercharge the amount of unique inventory publicly marketed on Redfin.com and our brokerage websites because more homeowners will choose to become sellers. For example, homeowners who are reluctant to put their homes for sale for fear of negative insights or due to the time of the year before the fall market in the winter. over the summer, will now have access to 60 million monthly active users without the risk of days on market or price drop history. And their coming soon listings will be prioritized on Redfin. This will bring more inventory to the market because it eliminates the artificial barrier that home sellers have to list their home, such as days on market, price drop history. Keep in mind, only 4 million people buy homes a year. So 60 million consumers reflects 15 times the amount of buyers that are buying a year. Third, with this partnership, we are reclaiming the digital yard sign for our agents and our brokerage brands, as our agents' name and their brokerage affiliation will be prominently displayed on each unique listing. This benefit cannot be understated, as it will significantly expand consumer awareness of our agents and our nine brokerage brands. Fourth, We believe the partnership will make home buying more affordable by increasing the amount of inventory on the market that otherwise would not be there, and by offering home buyers one percentage point off their mortgage rate in year one or up to $6,000 in lender-paid credits through Rocket Mortgage. Now, I would like to discuss the four sustainable financial advantages we are focused on going forward, including... a higher than industry revenue per transaction, a leading cost to serve position in the industry, an expanding LTV per agent, and lastly, lower customer acquisition costs. Starting with our higher than industry revenue per transaction, we expect to achieve this by becoming the leader in delivering value-added services for real estate professionals through platform-driven attach, as opposed to just the traditional channels used by other brokerages. This includes current services such as title and escrow, mortgage, home insurance, home warranty, and moving services, but also potential future services we may consider such as solar, home security, and other agent services such as property marketing, business spend, digital ads, property videos, 3D renderings, real estate, sign production, open house brochures, photography, and more. With an incremental TAM of more than $150 billion from these value-added services, Compass's potential revenue per transaction could be multiples above the industry average, creating a sustainable financial advantage relative to our competitors. Our second sustainable financial advantage will be to have the lowest cost to serve position in the industry. Since 2021, we have already reduced our cost to serve for transaction at Compass by over 30%, driven by platform improvements, process optimization, offshoring, and AI. However, with Anywhere, we see significant opportunity to lower our cost to serve further as we, one, Build a best-in-class centralized services operation that will be the most efficient in the industry. Two, offshore more back-end operations. And three, leverage AI to automate workflows and expand self-service tools on the platform. As early proof of how AI can help lower our combined costs to serve, in the five short months ahead, since we rolled out an enterprise-wide AI learning effort at Compass. The team has already identified potential analyzed efficiencies in the vicinity of $20 million, 2% of our Compass OpEx, which should allow us to limit OpEx growth as the business grows. At Anywhere, approximately two-thirds of all documents in their brokerage business are already processed through AI-driven automation. Anywhere's AI-based document assignment engine already operates at 89% accuracy and will continue to learn from the largest transaction dataset in the industry. Furthermore, Anywhere is also extending their capabilities to agentic AI, including automation of wire claims to accelerate resolution and help agents get paid faster, which lowers costs but also improves the agent experience. By doing all of the above and ultimately establishing the lowest cost-to-serve position in the industry, we believe we will be able to drive better brokerage incremental margins than in the past, which should serve us well, particularly as industry volumes begin to normalize. Our third sustainable financial advantage will be our expanding LTV per agent. As we bring more than 340,000 of our real estate professionals onto one connected platform. By connecting our franchise broker owners and real estate professionals through one seamless platform, we will scale our best in class listing tools, coaching, innovative marketing programs, and AI capabilities to help grow their business and help them make more money by better serving their clients. As we scale our offerings in a tech forward manner, we believe we'll be able to drive better agent and franchise retention, higher agent and franchise productivity, higher attached on value-added services, improved agent outcomes, and lower recruiting costs. Our fourth sustainable financial advantage will be our declining cost of customer acquisition. As we execute on our strategy to become the number one destination for buyers to find real estate professionals and homes for sale. As awareness around our unique inventory grows via the Rocket Redfin Partnership, we believe more and more home buyers will seek out our agents listings and our agents for their advice. This will lower our customer acquisition cost as our share of voice in the market increases and should provide our agents with incremental business opportunities. So bringing it all together, By combining our four sustainable financial advantages with what will continue to be a maniacal focus on OpEx and cost synergies, we believe we will build a more durable business model where adjusted EBITDA grows faster than revenue growth in the future. Now. let me provide an update on our integration efforts and cost synergy targets. First on integration, I want to start by saying how pleased I am by how well both our management teams are working together. Since close, we've made great progress by deploying best practices in integration, including establishing a transformation office that will be a single control tower to ensure we are achieving our targets, setting a clear roadmap, to create a more efficient organization across each of our business units and quickly creating clarity around the organization spans and layers. Additionally, in the six and a half weeks since closing the transaction, I've had the opportunity to spend time with countless employees, franchise broker owners, real estate professionals across all of Anywhere Six brands in many, many markets. Two themes have emerged from my conversations. First, there is broad-based excitement to be a part of the transformation our companies are going through. And second, the agents and broker owners are really excited to get access to the technology platform. This excitement is bearing itself out in the numbers as well, as Anywhere's GCI retention rate in its top two quartile of agents representing 91% of Anywhere's own brokerage GCI over the trailing 12-month period, hit the highest level ever recorded in the month of January. Now, shifting over to our cost synergies. On our Q3 earnings call back in November, we stated a target of realizing $150 million in synergies in the first year and $300 million in net cost synergies over three years. I'm pleased to say that since close, just the six and a half weeks since close, we have actioned approximately $175 million in cost synergies. Based on the pace at which the team is moving, as well as their ability to collaborate and share data, I am making a CEO commitment to action $250 million of cost synergies in the first year. Additionally, as we spent more time working together as a collective team, we have increased confidence in our cost energy opportunity. As such, I'm now making a CEO commitment to action $400 million in net cost energies over three years. I look forward to updating you on our progress against our improved goals in the coming quarters. Now, I want to end by talking about the three components of our business. that not only protect us from the threats of AI, but strengthen our business in the context of AI. The first is our proprietary data. The second is trust. I want to be clear. Compass isn't in the business of brokering information. It's in the business of brokering trust. And we believe trust will become even more valuable in a world with AI. And third, trust. is the positive network effects driven by our 340,000 agents, which strengthens our platform. Starting with proprietary data, we all know that AI is less of a threat for companies with proprietary data. And we all know that the Zillow ban in approximately 40% of MLSs have restricted rules that force brokerages to make their proprietary data public. With the Rocket Redfin partnership and the efforts I expect Compass and Rocket to take, I am confident that MLS and Zillow will no longer be in a position to force brokerages to make their proprietary data public. We currently already have more than 20,000 make-me-sell listings that are only available at Compass, and with the Rocket Redfin partnership, We believe we will have a large number of coming soon in private exclusive listings that will help grow our proprietary data. Our second pillar is trust. Compass is not a traditional SaaS company as we operate in the high trust advisory business. This distinction is significant. AI can replicate software features, but we don't believe it can replicate trusted human judgment. in a highly emotional, high stakes, high ticket transaction. Buying a home is not like any other purchase. It's one of the most significant and complicated transactions in people's lives. Buying a home is also much more than just searching for a property. A buyer seeks out a real estate professional because they know they will need the expertise and emotional support when negotiating and navigating the purchase of a home. They seek out a real estate professional, not just for information that is already available online, but for information on what's going to happen in the future, such as when the neighbor a few doors over might be ready for the next move because their kids just graduated college. They seek out a professional to serve as the last line of defense during a walkthrough at the closing. When the agent they are working with spots uneven floors or smells a wet basement and helps them negotiate a seller credit. I've been reading the same AI reports as everyone else. The reports that are addressing what could happen in a potential future for real estate. The quick summary is my AI agent will sell my house to your AI agent. They will do the best job and no one else is needed in the transaction process. In our 13 years with Compass, I've seen a lot of things. I remember in the beginning, the biggest pain points for people were fake rental listings. We started off in the rental space. You would see a listing. It was fake. You'd reach out to the agent. They will tell you they can show you the listing and then last minute switch it up and say, listing is gone, but I have something else to show you. AI will do that on steroids. The writers in some of these reports assume that real estate is clean and fair and that everyone is playing nice. But in real life, you have thousands of fake AI agents generating fake listings to bait you. Hundreds of fake agents will give AI agents false lowball bids to try and get them to price drop. Fake AI agents will list fake listings to try and change comp prices to get higher prices. It's going to get wild. I think the value of Compass will skyrocket in that world. The only solution will be closed networks of trust. People think Compass's core is brokering information. It's not. It's brokering trust. And in the very near future, unless you have a great agent that is real, transaction with agents that our network deems trustworthy, you will not be able to transact safely. The MLS data will be corrupted. Open sites will be filled with noise. Private listings and private networks with real people will be the only trusted source. I just don't see a meaningful amount of buyers letting a bot negotiate with a seller's agent. If that were the case, then you would already be seeing people buying homes based off of this estimate. You see people selling homes based off this estimate, and they're not doing that. Real estate is highly personal, and the value of a home isn't solely determined based on the generic data and facts about the home. The value is driven by a buyer's and seller's personal connection to the home. In this world, Compass's value proposition will strengthen as we build a highly trusted environment for buyers, sellers, and agents to own and manage their data with uncompromising privacy. And so for the same reasons that internet did not replace agents, but actually increased consumers use of them over the past 20 years, we believe that the winners of the future will not be the companies that simply have AI, but those that use it to amplify trusted agents at scale like Compass. Our third and final pillar is positive network effects of our 340,000 real estate professionals that strengthens our platform. This network serves as a large continuous positive feedback loop for our platform. We believe as agentic AI becomes more common, the platforms with the most domain experts actively training and interacting with the system will win. Our agents are encoding real-world localized transactional logic into our platform every single day, creating a network effect that cannot be replicated by horizontal AI tools or legacy brokerages. At Compass, we are using AI to eliminate friction, allowing our agents to focus on winning and closing clients, and by fully integrating it into the agent workflow to maximize productivity. By giving 340,000 real estate professionals countless hours back every week, allowing them to focus on winning listings, advising clients, and closing deals, we are going to help them to close more transactions. When evaluating Compass through this lens, we believe we possess the exact pillars to thrive in the world of agentic AI. With that, I will now hand it over to Scott.