Compass, Inc. (COMP) Earnings Call Transcript & Summary
January 9, 2023
Earnings Call Speaker Segments
Morgan Brennan
attendeeReal estate company Compass is undergoing its third round of job cuts in under 1 year, aiming to be cash flow-positive by mid-2023. Joining us here at the NYSE on set, Robert Reffkin, Compass Co-Founder and CEO. Robert, great to have you back here.
Robert Reffkin
executiveGlad to be here.
Morgan Brennan
attendeeLet's talk about the layoffs. Third round, what's involved? And how does this move you towards that cash flow-positive goal that you stated for the middle of this year?
Robert Reffkin
executiveYes. So we had announced expense reductions last week. I think it's worth noting, if we would have done that a year earlier, we would have been free cash flow-positive last year. And if the market would have grown last year as expected, we would have been free cash flow-positive. What happened is the Fed share came in and artificially reduced the revenue of our industry, bringing mortgage rates from an all-time low in January to a 20-year high in less than 9 months, creating the sharpest decline in real estate transactions on record more than 2008, which was a housing-driven financial crisis.
Morgan Brennan
attendeeSo when the CEO of Taylor Morrison -- the homebuilder, Taylor Morrison, comes out and says on air a couple of weeks ago, the housing's in recession, has been for a while, you agree?
Robert Reffkin
executiveI agree. But I believe that we will look back at Q4 as the bottom. And that Q1 may be the last great time to be a buyer for a while. We just saw that 42% of sellers are giving concessions, which is the greatest amount of concessions that sellers have given in over 10 years.
David Faber
attendeeSo it's all Jerome Powell's fault is what I heard you say. I mean did you overhire at all?
Robert Reffkin
executiveWe, along with many other growth companies, built our expenses to meet demand that was there and was expected to be there for many years. But that demand led to inflation, which the Fed had to address.
David Faber
attendeeYou never know exactly what the right sizes, I guess, given how dynamic things are right now. But what makes you feel like you're at the right spot in terms of generating free cash flow and having the people you need to deliver on the opportunity but not too many?
Robert Reffkin
executiveYes. So with what we announced last week, we believe we can be free cash flow-positive this year, accounting for a 25% decline in the market. That compares to Fannie Mae, which is -- they estimate is going to be down 22% this year. And MBA, Mortgage Bankers Association, National Association of Realtors believe this can be down much less.
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