Robert Reffkin, CEO of Compass, speaks on stage in New York City on November 6, 2019.
Brad Barket | Getty Images
Compass, a real estate brokerage firm with more than 19,000 brokers across the country, went public on Monday, telling potential investors that revenue rose 56% over the past year as property prices rose.
Founded in 2012 and based in New York City, the New York based company has sought to bring advanced technology to real estate agents that will provide them with better data, marketing tools, and customer relationship software than can be obtained from a typical brick and mortar agent.
Compass is one of the many technology-based real estate companies benefiting from a deluge of venture capital that enables emerging businesses to grow fast while burning money. Revenue soared from $ 2.4 billion in 2019 to $ 3.7 billion last year, but the company spent 82% of its revenue on commissions and “other transaction-related expenses.”
Net loss for the year decreased from $ 388 million in 2019 to $ 270.2 million, and cash and cash equivalents decreased 20% to $ 440.1 million.
Compass was last valued at around $ 6.4 billion in a 2019 funding round led by SoftBank’s Vision Fund. He also invested in office rental company WeWork, home flipping site OpenDoor, and construction technology company Katerra. OpenDoor went public through a reverse merger late last year and is now valued at over $ 17 billion, while WeWork is still trying to bounce back from a near-collapse in 2019. SoftBank owns 35% of the Class A shares of Compass.
Residential real estate has been a booming market over the past year, fueled by Covid-19 and the lockdowns that forced people to work from home. Realizing that remote working will stay here, homeowners have tried to move to more desirable locations, but the new supply has been limited, causing prices to jump.
According to the S&P CoreLogic Case-Shiller House Price Indices, house prices rose 10.4% nationwide in December year over year. This is the strongest annual growth rate in over six years and one of the largest annual increases in the index’s more than 30-year history.
Like many real estate companies, Compass faced challenges at the start of the pandemic as orders stayed at home and the economy was uncertain. The company cut 15% of its employees in March 2020.
However, business rebounded dramatically in the second half of the year and “the total number of transactions rose to 144,784, a 66% increase from 2019 regardless of the impact of the COVID-19 pandemic,” Compass said in the filing.
Stocks of online real estate site Zillow tripled over the past year, while Redfin stocks rose almost as much.
Correction: An earlier version of this story had an incorrect number for commission and transaction costs.
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