Compass IPO: A quick financial and operational review

Compass S-1 reveals the brokerage advised on 1.3% of national transaction sides, yet lost $270 million

SoftBank-backed residential brokerage Compass filed paperwork with the Securities and Exchange Commission back in January for an IPO. And today, March 1, we finally get a peek under the hood with the full S-1 including financials.

Before diving into the numbers, a few operational bullets from the IPO filing:

  • Compass bills itself as an ‘end-to-end platform that empowers residential real estate agents to deliver exceptional service to seller and buyer clients’
  • While many innovators talk about eliminating agents from the home sales model, Compass ‘fundamentally believes that agents are, and will continue to be, central to residential real estate transactions’
  • Though the company doesn’t reveal its methodology, the Compass filings boasts that their agents: (a) close an average of 19% more transactions in their second year with Compass ; (b) sold homes in 21% fewer days, on average, relative to agents at competitive firms; and (c) 88% of agent teams used Compass’ proprietary technology platform at least once per week and two-thirds used it daily

Compass has been a prolific agent recruiter and acquirer. Agent performance metrics are highly influenced by the agents that have joined the platform.

Compass operational metrics

According to the National Association of Realtors, more than 5.6 million homes (which translates to 11.2 million transaction sides) were sold in the U.S. in 2020 – representing approximately $1.9 trillion in transaction value.

Of these 11.2 million transaction sides, Compass advised on 144,784 or 1.3% of all national transaction sides. This equates to $151.7 billion in gross transaction volume, and Compass reports that this equates to 4.0% of the U.S. market. The S-1 defines that market share is calculated by dividing Gross Transaction Value, or the total dollar value of transactions closed by Compass, by two times (to account for the sell-side and buy-side of each transaction) the aggregate dollar value of U.S. existing home sales as reported by NAR.


Compass is also growing agent headcount at an impressive clip – from 2,694 agents in 2018 to 8,686 agents in 2020 – an 80% agent headcount CAGR, though the growth rate did decline significantly in 2020. Today, Compass has 19,000 agents.

It’s also noteworthy that Ori Allon is no longer on the board of directors as of February 2021. Ori Allon co-founded Compass with CEO Robert Reffkin in 2013. Allon remains the largest individual shareholder with 5.2% of Class A Common Stock.

Compass financial highlights

Total revenue expanded from $884.7 million in 2018 to $3.72 billion in 2020, a 105% CAGR over two years – which is relatively in line with total transaction growth (130% CAGR from 2018-2020).

Total operating expenses – primarily fueled by commissions and other transaction-related items – also ballooned as the business has expanded, with 2020 total operating expenses approaching $4.0 billion. However, total operating expenses grew at a 88.6% CAGR from 2018 (less than the revenue CAGR) – which brings Compass ever so slightly closer to profitability as the company prepares for its IPO.


The business lost $273.3 million from operations in 2020, notably down from a $401.8 million loss in 2019. The Compass S-1 warns that “we may not be able to achieve profitability and we may continue to incur significant losses in the future. Moreover, as we continue to invest in our business, we expect expenses to continue to increase in the near term.”

All of this said, the S-1 does reveal that Compass has recently identified material weaknesses in the company’s internal controls over financial reporting. Compass discloses that the internal control weaknesses and remediation of such material weaknesses are risk factors to the public offering.

The tech stack

The IPO filing bills Compass as an ‘end-to-end platform that empowers residential real estate agents to deliver exceptional service to seller and buyer clients.’ Compass reports to have built an integrated software platform that helps agents operate with the sophisticated capabilities of a modern technology company and the personal attention and service of a dedicated advisor. Using proprietary data, analytics, AI and machine learning, the Compass platform delivers a broad set of industry-specific capabilities for Compass agents and clients.”

The following chart from the Compass S-1 outlines the business model sitting atop the cloud platform.


While many real estate and financial services firms complain about attracting top engineering talent, the Compass S-1 brags that “the caliber and pedigree of our technology leadership helps us attract and retain top-tier software engineers and AI talent globally. We have a team of over 650 highly experienced product and engineering professionals based out of our innovation hubs in New York, Seattle, Washington D.C., and Hyderabad, India.”

In 2019, Compass acquired Contactually. And in 2020, Compass acquired Modus Technologies, Inc., a title and escrow company. These deals align with the S-1 comments that “we may look to larger acquisitions to provide us with additional technology or adjacent services.”

The themes outlined in the Compass IPO filings align well with MetaProp general partner Zak Schwarzman’s predictions for the 2021 proptech market. Schwarzman predicted, “we continue to watch some notable PropTech categories, including all manner of single-family home-related technologies, which have benefited from the flurry of home buying and renovation activity that has accompanied the COVID-crisis. These include tech-enabled brokerage, mortgage, closing and other transaction-focused solutions as well as digital solutions focused on home improvement and home services, the discovery and management of which continue to move online.”

Note: This article was updated to reflect that Compass advised on 1.3% of transaction sides, not 2.5% total market share. The National Association of Realtors reports that more than 5.6 million homes were sold in the U.S. in 2020, which translates to 11.2 million transaction sides.

Compass calculates market share by dividing Gross Transaction Value, or the total dollar value of transactions closed by Compass agents, by two times (to account for the sell-side and buy-side of each transaction) the aggregate dollar value of U.S. existing home sales as reported by NAR. 

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