Real EstateBrokerage

We read Compass’s 10K so you don’t have to

And, boy, did it reveal some interesting nuggets about the company's expenses and litigation

HW+ Robert Reffkin Compass
Compass CEO Robert Reffkin

“People used to talk about Compass all the time,” said Jonathan Miller, a real estate appraiser at Miller Samuel, who compiles housing market reports for Douglas Elliman, a Compass rival. “Now, you don’t really hear about them.”

If Miller is right and Compass, after raising $1.5 billion and flying to a $6.4 billion valuation in 2019, is a stale subject, that’s a shame because now anyone can become a Compass expert. The real estate brokerage unveiled its first annual report Monday, a federally required document for any public company. The dossier unveils everything from CEO Robert Reffkin’s ability to soon control 67% of the company to an all-you-can-eat buffet of details on an up to $600 million revolving line of credit provided by Barclay’s Bank.

Here are the five biggest takeaways from the 2021 10K report. Compass did not respond to messages for this story:

  • Shooting the non-GAAP

Under Securities and Exchange Commission law, companies must apply generally accepted accounting principles, or GAAP, in reporting their finances. In other words, companies cannot make stuff up. However, while companies cannot lie, they can have fun and devise non-GAAP measurements.

No less than 16 times during its February earnings call, Reffkin and CFO Kristen Ankerbrandt mentioned “adjusted EBITDA” or adjusted earnings before interest, taxes, depreciation, and amortization. Though Compass had lost $494 million in net income, they made a $2 million profit through adjusted EBITDA.

Compass arrives at its adjusted EBITDA figure by subtracting $386 million in stock-based compensation, though the majority of this expense is recurring annually. It also takes out $24 million in “acquisition-related expenses” despite the report stating Compass intends more acquisitions. And there’s a $21.3 million “litigation charge” (more on that in a sec). <<<<Continued on HousingWire.com.

This article was originally published by HousingWire. The full article is available on HousingWire.com for HW+ Members.

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