Brokerage

Compass CFO steps down following tough Q1

The company reported $188 million in losses for the first quarter

Kristen Ankerbrandt, who helped steer Compass to its initial public offering but has presided over major losses, has stepped down as the company’s chief financial officer.

A replacement has not been announced for Ankerbrandt, who has served as CFO since 2018. Ankerbrandt will receive a $1 million lump sum payment on her departure and is “entitled to accelerated vesting of her unvested equity awards,” according to a Securities and Exchange Commission filing.

Compass also announced that its chief product officer, Greg Hart, will take over the unfilled position of chief operating officer.

Ankerbrandt said on Compass’s first-quarter earnings call that she would, “Start my own investment fund” after departing Compass in September. She took credit for “managing the company through outstanding growth” and “delivering on our commitment toward profitability.”

In fact, Compass has not enjoyed a profitable quarter since its shares began trading on the New York Stock Exchange in April 2021.

The company reported $188 million in losses for the first quarter, compared to $212 million in negative net income for the first three months of 2021. Overall, Compass lost $494 million last year, and bled out $682 million in net income losses the last five quarters.

Compass has consistently grown its revenue, posting $1.4 billion in first-quarter revenue compared to $1.1 billion revenue in the first quarter 2021. But almost all the revenue stems from commissions on real estate sales. And most of that money goes straight back to Compass’s growing legion of agents.

Once “commission and other related expenses” are deducted, Compass generated $251 million in first quarter revenue.

This difficult financial picture was largely not discussed by CEO Robert Reffkin or analysts on the call, who focused on the company’s growing market share.

Compass is now the biggest real estate brokerage in the country as measured by sales volume, according to RealTrends rankings. And the firm posted $53.7 billion in sales volume in 2022’s first quarter, up 22% year over year.

But sales volume and market share are not always proxies for brokerage performance. That especially might be the case if independent contractor agents snare north of 80% of each commission plus cost the brokerage technology and marketing dollars.

Other brokerages have sought to solve this problem by building out so-called adjacent services including title and escrow and mortgage. Compass has not done that yet. The company announced a mortgage joint venture OriginPoint last July, and it has acquired numerous title companies.

These adjacent services, though, make up just 1% of the company’s revenue, Reffkin said on the call.

Reffkin, who co-founded Compass, nonetheless expressed optimism about the company’s trajectory. He noted Compass has $476 million cash on hand, and a $330 million credit facility.

“We are managing the business in a way that will not require additional capital,” Reffkin said, adding that the brokerage is learning to do, “More with less.”

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