Compass, Inc. Price & Performance (COMP)

Thank you very much, operator. Good afternoon, everybody. And thank you for joining the Compass First Quarter twenty twenty five Earnings Call. Joining us today will be Robert Raffkin, our Founder and CEO and Kehlani Rulitz, our Chief Financial Officer. In discussing your company's performance, 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 twenty twenty five 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 twenty twenty five 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. Can find more information about risks, uncertainties and other factors that could affect our results our most recent annual report on Form 10 ks 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 8. We expressly disclaim any obligation to update this information. I will now turn the call over to Robert Raffkin. 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, through 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 quarter of positive free cash flow.

Revenue in the first quarter increased by 28.7% year over year. Total transactions and organic transactions increased by 27.87.3% year over year, respectively. Respectively. As compared to the overall market where transactions decreased by 2.1%. So this means Compass' total transaction count outpaced the market by close to 30%. Compass' organic transaction count outpaced the market by 9%. In Q1 twenty twenty five, we generated record Q1 adjusted EBITDA of 16,000,000 up from the negative $20,000,000 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' value proposition is resonating better than ever 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 six ninety five 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'm 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 form a figure in inclusive of the Christie's International business in Q4. Non GAAP OpEx was $235,000,000 in Q1 which includes part of the Crissy'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 clear preparation 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 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, 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 algorithm evaluations lower, 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, go to the public sites with the benefit of pre marketing.

And that's the reason why nearly half of our clients in q one 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. Incumbent 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 try 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 this 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' inventory advantage. 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 OpEx at 3% to 4% annual growth even as transactions recover from 4,000,000 existing home sales for the past two years back to the 5.4 to 5,600,000 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 and 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 and A, with roughly 80% of The U. S. Market generating less than $10,000,000,000 in GTV last year, and only 22 brokerages generating more than $10,000,000,000 in GTV. There is a significant amount of fragmentation that exists in the brokerage market today. Our M and A pipeline remains healthy today as a reminder, we continue to target brokerages within the four to six times EBITDA multiple range.

Next, we will expand margins by increasing tax 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, leads and data. In our T and E business, we are seeing evidence that we can more than double our unit economics per 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 and 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 $1,000,000 Given that we are targeting an adjusted EBITDA margin of 25 to 30% on each T and A 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 TD transaction to a brokerage transaction can almost double our unit economics. Second, in addition to attaching more T and 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 and L but the bottom line contribution can in many cases be higher than a T and A 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 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, can generate hundreds and hundreds of millions in adjusted EBITDA and 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, 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. Thank you, Robert. Summarizing our financial results for the quarter, our first quarter revenue was 1,360,000,000.00 an increase of 28.7% from the year ago period. While M and A contributed to the year over year growth in revenue, even excluding m and a, revenue increased 14.6% on an organic basis. Despite the strong year over year growth, our revenue was near the low end of our revenue guidance for the quarter, which reflects some slowdown we saw in the March. That we believe was due to market uncertainty driven by tariff discussions at the time. Of note, existing home sales in March per NAR were at their lowest levels of any March since 02/2009. And due to the seasonality of our business, the month of March always represents the largest revenue month of the first quarter, so this market volatility had a more outsized impact on our realized revenue to the expectations we put out in mid February. Transactions for the quarter increased 27.8 or 7.3% on an organic basis. Which compares very favorably to the overall market where transactions declined by 2.1%. This outperformance of the industry is also reflected in our market share, which was 6% in the quarter.

An increase of 125 basis points from the year ago period and a 95 basis point increase from Q Q4. Gross transaction value was $52,000,000,000 in the first quarter, an increase of 30.7% from a year ago. Reflecting the 28% increase in total transactions combined with a slight increase in average selling price of about 2.5%. Our average selling price was higher by 10% on an organic basis, but the latter in Bloom and Parks acquisitions in 2024. And the Christie's International real estate acquisition earlier this year all have lower average selling prices compared to our organic businesses which reduced the overall increase in average selling price. Our commission and other related expenses as a percent of revenue was 81.6%, improvement of 24 basis points compared to q one of last year at 81.8%. Consistent with our comments last quarter, we expected the acquisition of Christie's International Real Estate to favorably impact this metric, which is reflected in the results. Excluding m and a, our commissions and other related expenses as a percent of revenue increased 38 basis points We are okay with this trade off today given that our highest producing agents are also taking share in the current environment.

But over the long term, we also remain focused on recruiting the up and coming agents that come at a much better split our highest producing agents. Our total non GAAP operating expenses were $235,000,000 in Q1. An increase from $211,000,000 of OpEx in the year ago period which was driven by M and A. Including the OpEx we assumed from the 01/13/2025 acquisition of Christie's International Real Estate and the acquisition of Ladder and Bloom, and Parks Real Estate in the second quarter of twenty twenty four. It's worth repeating that we remain maniacally focused on keeping our annual organic OpEx growth to 3% to 4% excluding the impact of M and A. And based on our Q1 results, we are tracking in line with this goal. We are also making good progress on our integration work with Christie's real estate acquisition. And we're tracking ahead of our stated synergy goals. When we announced this transaction. I'm very pleased with how well the respective teams are working together in such a short time frame since the January closing for what has been the largest acquisition we've done. When modeling OpEx for the year, keep in mind that Christie's International real estate acquisition was completed on January 13.

So only half a month of January's OpEx is reflected in q one. Also, as a reminder, while much of our OpEx is somewhat fixed in nature, there is some seasonality related to the timing of our annual employee compensation cycles and the timing of when agent marketing expenses are incurred. Such that we tend to see a slight step up in OpEx for q compared to Q1. Our adjusted EBITDA for the first quarter was a new record for us as it was the first time we've ever achieved positive adjusted EBITDA in the first quarter of any year. Adjusted EBITDA was $15,600,000 which was within our guidance range of 11 to $25,000,000 and a strong improvement from the loss of 20,100,000.0 a year ago. GAAP net loss was $51,000,000 in Q1 compared to the GAAP net loss of $133,000,000 a year ago. Which includes the 57,500,000.0 charge for the settlement of our antitrust litigation. In the year ago period. As a reminder, the non GAAP operating results amid certain expenses that we from the calculation of adjusted EBITDA. Which are reconciled to our GAAP operating results on pages twelve and thirteen in our Q1 investor deck. We generated $19,500,000 in free cash flow in the first quarter which was not only an improvement over the $5,900,000 of free cash flow from q one twenty twenty four, but also a new record level of free cash flow for the first quarter.

It's important to note that for the last two quarters, our free cash flow exceeded adjusted EBITDA levels, which is not typical. Some favorable timing of working capital changes helped with these cash flow results and we'd expect to give back some of the favorability in Q2. Also, as a reminder, we have the second half of our class action settlement payment due in q two in the amount of approximately 29,000,000 which will negatively impact free cash flow. We ended the first quarter with $127,000,000 of and cash equivalents on our balance sheet and $50,000,000 outstanding on our revolver. The decrease in cash this quarter was largely due to the cash portion of the purchase price for the Christie's International real estate acquisition of about a hundred and 50,000,000 which was funded by cash on hand along with the 50,000,000 draw on our revolver. Our weighted average share count for the first quarter was $550,000,000 which was in line with our guidance As a reminder, the increase in our share count during the quarter was largely the result of 38,500,000.0 shares, which represents the minimum number of shares that will be issued in connection with the Christie's International real estate acquisition.

When the equity component of the purchase price and related collar adjustments is finalized in q one of twenty twenty six. Turning now to financial guidance. For q two of twenty twenty five, we expect revenue in the range of $2,000,000,000 to $2,150,000,000 and expect adjusted EBITDA be in the range of $115,000,000 to $135,000,000 The revenue guide does take into consideration some of the short term volatility and revenue growth we discussed towards the March And while we have factored in some of the volatility experienced in q one in the q two guide, it's important to know that we still expect strong year over year growth believe we will continue to outpace the overall market based on our forecast and external forecasters such as MBA. Also, the L and B and Parks acquisition occurred in April and May of twenty twenty four, respectively, So as of q two, we have fully anniversaried those acquisition dates. As it relates to OpEx, last quarter, we stated that we're targeting a range of 1,005,000,000.000 to 1,030,000,000.00. In total OpEx for 2025. Which included the incremental OpEx from the January 2025 acquisition of Christie's International Real Estate, Since then, we've acquired Washington Fine Properties and a title company in Texas that will collectively add OpEx of about $12,000,000.

Resulting in an updated full year range of $1.017 to 1,042,000,000.000 Importantly, we expect our organic like for like OpEx to grow in the 3% to 4% range, in line with our stated goal. We expect our weighted average share count for the second quarter to be between five sixty to five sixty three million shares. As a last point on guidance, we expect our stock based compensation expense to be in the $55,000,000 range, for the second quarter, which is an increase from the $30,400,000 level from Q1. This increase is driven by the accounting rules for stock based compensation, and importantly, it does not change the anticipated dilution which is expected to continue to approximate the 1% of additional dilution per quarter we've been guiding to. To expand on this a little further, as a reminder, in 2022, we changed our method for employee equity grants to minimize the number of shares used from our authorized pool at the time when our stock price was down significantly. This resulted in no change to how we compensate our employee, and no difference in the time periods the shares vest to the employees. But it allowed us to issue fewer shares upfront.

However, now that our share price has recovered nicely, we have reverted back to our prior method of annual grants. And in q two, we plan to grant the remaining share commitments for the prior years under our changed methodology. All that said, the accounting rules require us to set the amount of stock based compensation based on the stock price at the time of grant not at the time of commitment. And, therefore, there is a timing difference between when the shares over these past couple of years were committed to when the stock was below $4, which is what drives dilution. [indiscernible] they're being granted at higher price points as high as $9 per share recently, and that is what drives the stock based compensation. So, again, to recap this, we've been guiding that the quarterly dilution for employee stock compensation has about 1% of the outstanding and that will continue at those levels despite the increase you'll see in stock based compensation lines. Importantly, and I want to make sure we're crystal clear here, while a company's stock based compensation levels are generally indicators of dilution, that isn't the case here since this step up in stock based compensation is more of an accounting practice related item.

We expect to see the quarterly stock based compensation at this new level for the balance of 2025 and it will step down in 2026 and again in 2027 as these awards were granted with a higher stock price vest out. Over the longer term, we expect to manage stock based compensation at closer to the $100,000,000 level annually. As Robert started the call, Compass continues to execute against our strategy, and our record results confirm. That we are focused on the right strategic priorities and are executing our strategies with excellence. Our record results are the clear result of the hard work of our incredible agents and the dedication of our team members who work tirelessly to deliver our mission. Thank you to our agents and employees for all you do for Compass. I would now like to turn the call over to the operator to begin q and a.

We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you have dialed in to today's call, please press Your first question comes from the line of Chris Kuntarik from UBS. Your line is open. Please go ahead.

Great. Thanks for taking the question. Just going let's start on the 1Q revenue.

Could you just help us think about what revenue or what was revenue growth tracking to ahead of the disruption in the March? And then as we think about the 2Q guide, is revenue growth tracking in April?

Yeah.

We'll start there. Thanks. I'm gonna I'll I'll start it, and I'll I'll pass on to you, Kwani. Well, it's not a surprise that the there's volatility in March and in April. The talk of tariffs impacted March. Actual tariffs impacted April. We saw the S and P 500 down almost 17%. And Nasdaq down more than 20% through the April. And March was also the lowest March on record in terms of transactions since 02/2009. Yeah. I think just overall, what we're what I what I believe we will see is this year to look a lot like last year. Prices will be relatively flat because we have more inventory It's almost 3% more inventory of single family homes than this time last year, and that more and more inventory reduces the the pressure on prices. And so we're seeing price relatively flat. In units, it looks like, will be just modestly up. But but, Connie, I'll I'll pass it on to you.

Yes. Thanks, Robert. Thanks, Chris, for the question. I think when you when you look at q one, I I think we were, you know, I think we were probably tracking, you know, close to the midpoint of our our guide in and and then we saw some of the volatility there. I think as we think about q two and April, I think April is tracking at our expectations. When we look at kind of the midpoint of our Q2 guide, we're showing some really strong growth expectations. Our Q2 guide is a little lower than Q1, but I think the factors are what you would expect. I think we have built in some of the volatility impacts that we have seen in March into April. And in April, we've had day fall adjustment of Easter April, which actually has an impact on on just activity. And then Q2 was a much tougher comp year over year than Q1. And then finally, as expected, we anniversary Ladder and Bloom and our Parks acquisition So overall, we're seeing April at our expectations and and again, continue to see and expect us to outpace the market and win market share through q two.

That's helpful. As we think about the disruption in the back half of of March, my sense is that what you're talking about is people are putting themselves on pause when they're planning on completing a home purchase. Are you seeing any of those purchase like how should we be thinking about the share of purchases that were completed so far through April and kinda are there other case studies to look back when there were points of significant market disruption here? When a a part of a month or a full month has been disrupted here, how long it typically takes for some of those transactions to end up getting completed? Thanks.

Yeah. Look. My my view is that the the loss was a temporary loss of transactions, not a permanent one. And so I would expect the full year transactions to be in line with what it would have looked like otherwise, just a deferral. That is if, assuming we see stability in the markets, and no more surprises like we saw with the the talk of tariffs and the actual tariffs. But to answer your question, I think it's more of a deferral demand, not an elimination of demand. Also, I would expect our agents to continue to gain share from agents outside of Compass. Our transactions our in screw transactions, as mentioned, earlier, 9% faster than the market or more than the market, and we expect that to continue.

Helpful. Thank you.

Thank you.

Your next question comes from the line of Jason Helfstein from OpenHire Oppenheimer and Co. Your line is now open. You may go ahead.

This is Steve Roman on for Jason. So So apologies if this has been asked already as we're juggling several calls at once. Could you just, if possible, level set for investors what the latest with NAR's clear cooperation policy? And is your sort of legal standing, for lack of better term, of the the three phase marketing strategy still intact?

Thanks. [indiscernible] appreciate the the the legal standing because, yeah, this they're they're not laws. Know, NAR is not the government. They're not elected officials. So I appreciate that. The CCP is ongoing. A Gnar added one layer of flexibility to expand choice. It's worth noting, as mentioned on the call earlier, three phase marketing strategy. Works under CCP and all of the the current rules. Private exclusives, coming toons, then moving to the MLS and the portal sites. As I mentioned earlier, in my prepared remarks, homeowners are looking for more choice They're not looking for less choice. And Compass supports homeowner choice. And the Compass three phase marketing strategy does exactly that instead of just one launch. You know, you get three launches. And you get a test price privately without the risk of days on market or price drops. 36% of the homes on the market right now single family homes have a price drop. All look like damaged goods. And when it's a Compass private exclusive, it's Compass coming soon. There's no days on There's no price drop history. And so it protects homeowners with their you know, from that risk. And, again, you know, homeowners should have the choice on how to market their private property.

It's their home. It's their private property. It's often their most valuable asset. And Compass stands for homeowner choice.

Thank you. Your next question comes from the line of Bernie McTurnan from Needham and Company. Your line is open. Please go ahead.

Great.

Thanks for taking the question. And Robert, just to follow-up on that.

So are I get the point that three phase marketing is still in in is still a priority, but are you okay with your houses or with inventory not being available on Zillow or just you know, what the response has been from agents? Just trying to you know as as as things are still being worked out in the industry, what's happening real time?

Yes. Again, this is about choice versus control. Compass stands for homeowner choice. And so homeowners have a choice on how to market their home. You can market your home three phase with a three phase marketing strategy. Market it without the three phase marketing strategy. You can market it with a three phase marketing strategy where it goes to Zillow everyone else. You can market in a different way. What it's the homeowner's choice. And so this is about choice, again, versus control. And I don't know a homeowner who wants NAR, the MLS, or a portal to tell them how to market their home.

Got it. Understood. And post these these NAR changes, has there been any change in the organic recruiting effort for the for the company? I'm assuming that three phase marketing was a was a big push and and not sure if it and just wanna see if agents are still responding to that value prop proposition. [indiscernible] I think you can see that the percentage of homeowners working with their agents to market their home having elected to use the commerce through phased marketing strategy. You can see that from those numbers, that the demand continues to be strong. I think you what I would say are you know, top agents, luxury agents, it resonates more with them because, clearly, if the the benefits of testing price premarketing, the the higher up the price point, the more it it tends to resonate. Although it resonates across price points, more in the luxury segment. So I think we continue to see see that attraction. And, look, I'm pleased to see other brokerages. Right? I mean, you know the names of them, other, you know, great national brokerages. With national presence offering choice and following Compass' position that homeowners should have more options than one one option.

And so, you know, premarketing and testing price, through alternative listing methods has been adopted and and there have been announcements from other major brokerage firms along those lines over the last two months. I think that's a good thing for homeowner choice.

Yeah.

Yeah. Bernie, I would I would also add everything Robert said. I would also add just we we expect we saw 700 organic agent ads this quarter. As we've said, we expect six to seven, you know, even seven plus hundred We continue to see momentum there. The reasons have not changed. Our platform, our our technology continues to be the the strongest asset for agent recruiting. We we see a ton of momentum there. Our inventory strategy, the depth of inventory, the three phase we continue to hear a lot of strong stories there helping recruiting And then I also I I think it's important to to note that we are seeing competitors struggle to create value for agents, and that's beginning to be a trend. A number of large brokers are cutting cost, Smaller brokers are lacking the tools and resources to invest while and while that's happening, I think we're we're making sure and agents are seeing that Compass is investing in agents, launching new technology, new tools, acquiring companies, and advancing our our strategy around that inventory. So I think we are seeing continued favorable trends that we saw in Q4 and Q1, and that hasn't stopped in Q2.

Understood. And one more, if I could, just a quick one, the clarification on OpEx. Connie, I know you mentioned how seasonality 2Q is normally higher than 3Q. Should February be that number that can kind of run rate for the rest of the year, or should we expect an additional step up from seasonality in the second half? Thank you.

Yep. Yep. Q two is probably the right proxy overall. I think we guided to Bernie, I would point you to we guided to kinda annualized, but that's probably the right proxy generally, just because q two has the, comp level changes in q two. So I would use q two, but kind of able to force through the the annual guidance that we have to to kind of smooth out the the remaining quarter.

Great. Thank you.

Thank you. Your next question comes from the line of Michael Ng from Goldman Sachs. Your line is now open. Please go ahead.

Good afternoon. Thank you very much for the questions. First, I wanted to ask about principal agents and agent recruitment I certainly appreciate the disclosures around the gross adds as a result of Christy's and organic adds. I was wondering if you could just talk a little bit about churn trends in the quarter and if there's anything unusual that you would point to that may have caused churn in the quarter whether the environment or the deal itself? And then second, one for Robert. Just on the three phase marketing strategy, as you as you roll this out over the next couple months and year, was wondering if you could talk a little bit about what your yardstick for success of the strategy is, whether that's agent recruitment or Compass market share gains, We'd just love to hear a little bit more about that. Thank you.

Maybe I'll start with the first question and I'll pass on to Clonie for the second. Look. What Compass Compass exists to make agents more successful. If we cannot make agents more successful, we have no reason to exist. We're here to help agents realize their entrepreneurial potential. The Compass three phase marketing strategy does that. It the unintended consequence of NAR rules, rules like CCP, are agents all look the same. On their own listings, their their names are almost invisible. On third party sites. If they put a photo of if their headshot is in their photo, the or their signs in a photo, or a video that they put into the MLS, the MLS will take it down. They make them invisible. They can't watermark their own photos. Then the MLS watermarks it. And so with the Compass three phase marketing strategy, it helps them differentiate. Instead of a one size fits all world where every agent works with their seller and just puts it in the MLS. And that's all that's their marketing plan. We have a three phase marketing plan. With a lot of different benefits and strategies within each phase if you choose to use it.

You test price privately, no days of market, no price drop history. We could build an interest list We can when other agents just wait until they they wait weeks to put it into the MLS, The second we sign this listing agreement, we can put it in as a private exclusive. Already start getting feedback on how the home is positioned. And so this is a tool. There there's an agent that said, one of our top 10 agents said, the answer to every client objection is private exclusives. Oh, you you wanna list it at $5,000,000? The comps are saying 4.5? Hey. Well, let's test price privately. As a private exclusive. So what success looks like is that our agents continue to have an edge. That our agents continue to differentiate, that our agents continue to outperform as we saw last quarter, that our agents continue to get more listings as we can see in the data and they continue to sell those listings at more attractive terms for the seller. So that's that is what success looks like. And, and because it's creating that success is why it will continue.

Despite organized real estate's deep desire to restrict them and their homeowners from having choice.

Kalani? Yep.

Yep.

Thanks, Michael. Just on your question on churn, Look, think we're you've heard it. We're pleased with the 700. Gross agent ads particularly in q one. It's just showing the the power of our platform and inventory strategy. I think the my favorite sub metric there is is with Chrissy's international real estate, we've added agents. Instead of churn. So that that's a the real positive The churn we saw in q one was right in line with our historical levels. When we when we look at it, I think just just recall that q one is typically when we go through our renewal process beginning of the year. So we typically see the highest amount of churn in first quarter, but to be completely we we were kinda laying on top of each other quarter one last year quarter one this year on churn. So no no significant change.

Great. Thanks, Robert. Thanks, Kalani.

As a reminder, if you would like Your next question comes from the line of Elizabeth Langan from Barclays. Your line is open. Please go ahead. Elizabeth, your line is now open. You can unmute yourself using the bar at the bottom of the screen or by pressing star 9.

Hi. Are you guys able to hear me?

We are able to hear you. You can go ahead.

Okay. Great. Thank you very much. This is Elizabeth on for Matt today. I did have a couple questions actually about the private exclusive listings. I know that that's kind of been a a topic on the call so far. But I was wondering if you could talk about how agents are actually using it. Are you seeing people, you know, kind of actually get those offers while they're marketing it privately, or are you still seeing people kind of migrate to the public listings? After going through that three phase marketing Yep.

Organized real estate [indiscernible] organized real estate, which are entities that use agents listings to create market power to charge agents dues. Or to take their listings and monetize the homeowners listings through referrals. And selling leads. Organized real estate would have you believe that the only reason why people do private exclusives is doubling deals. The majority of our transactions that that close as a private exclusive are co wrote with with an agent at another brokerage firm. And to help dispute that fact, we and we encourage that. We want to co broke. We co broke with everyone. 94% of our listings, including the listings that start off as Compass Private Exclusives, are get to the MLS and the portal sites at phase three. What I would highlight is it's not the one phase marketing strategy. It's the three phase marketing strategy. The goal is to get to the third phase. The the, private exclusives when it's a private exclusive, NAR is now allowing us, which is great, be able to share one on one our private solutions with agents at other companies. And so I I I would expect that the vast, vast majority of our private schools are shared with other brokers one on one.

And we launched a a digital book and it's also a print one, but in our office to help dispute the the the claim that this is about double ending deals. And we're inviting any agent from other broker firms to come over and look at our listings. Again, we wanna co broke with everyone. Contrary to what it may look like from the outside. CCP or clear corporation is not a rule against private listings. If you can ask any agent, long can you do a private listing? Say for as long as you want. But then you ask them the question, how long can you publicly market a listing that's not an MLS? They'll say one day. So clear cooperation is not a rule against private listings. That's the marketing campaign they use. It it mean that's the marketing campaign of NAR. What clear cooperation is is a rule against marketing a listing in any way outside of the MLS. And so it the rule does make it hard to cooperate with agents outside of the MLS. And their rules with days on market price drop history, not letting an agent have their face in their own photos.

You know, not letting them begin their own videos, not being able to own their own photos. Like, list could go on and on and on. This the the but the goal is not to double in deals. And to do inside deals. The goal is to give homeowners an alternative marketing method outside of just a single MLS. % aligned with. But there's another half that are that have rules and restrictions that deeply hurt homeowners. And the three phase marketing strategy is a way to get out from under the thumb of these rules that are anti homeowner, which I'll close by saying, Clear Corporation does not have any restrictions for developers or homebuilders. Developers and homebuilders are smartest, most sophisticated, the most profit driven people in real estate, they've been carved out of clear cooperation the entire time. And so that's just not fair. That's not right. And so that that's really our what success looks like. In addition to giving our agents an edge that they can get to their clients. Success looks like is, home individual homeowners are able to have all the marketing flexibility that a big developer and billion dollar homebuilder would have.

Thank you.

Thank you very much.

Thank you.

I had Do you have a follow-up? Go ahead.

Yes. I did have a follow-up. I wanted to touch on market share. Obviously, you've seen it move higher. Into this quarter. But kind of in the context of M and A and expanding your platform, through transactions. I guess, are you thinking about it given the context of today's market? Are you seeing kind of interesting things come up or reasonable pricing just given all of the uncertainty or if things kind of cooled down a little bit.

Kalani, I'll let I'll let you answer that question.

Yeah. Sure, Elizabeth. Thanks for the question. Overall market share, we're obviously pleased 6% in the quarter. And significant increase quarter over quarter, year over year. I you know, we expect to see that continued market share gains both organically and then through acquisition. And I think think we're seeing a market where the best agents are are winning listings, and we continue to see our top agents produce. And and quite frankly, I I think we'll see, you know, a a a continued trend similar to the last few quarters in market share. You know, based on both our our productivity of our agents our our organic agent ads, as well as our our m and a activity.

Thank you. Thank you.

There are no further questions at this time. I will now turn the call back to Robert Rufkin for closing remarks.

Well, thank you everyone for joining our call today. Wanna end by thanking all of our employees and agents for their hard work. As you can see from our q one results, Compass is continuing to outperform the market. And we're using our platform to give our agents an edge in the industry. We have a long runway for growth, and we look forward to updating everyone on our progress. Thank you, and have a great rest of your day.

This concludes today's call. Thank you for attending. You may now disconnect.