Compass, Inc. (COMP) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for joining us, and welcome to Compass, Inc.'s First Quarter 2025 Earnings Call. [Operator Instructions]. I will now hand the conference over to Compass' Head of Investor Relations, Soham Bhonsle. Please go ahead.

Thank you very much, operator, and good afternoon, everybody, and thank you for joining the Compass First Quarter 2025 Earnings Call. Joining us today will be Robert Reffkin, our Founder and CEO; and Kalani Reelitz, our Chief Financial Officer. In discussing our company's performance, we will refer to some non-GAAP measures. You can find the reconciliation of these non-GAAP measures to the most directly comparable GAAP measures in our first quarter 2025 earnings release posted on our Investor Relations website. We will make forward-looking statements that are based on our current expectations, forecasts and assumptions and involve risks and uncertainties. These statements include our guidance for the second quarter of 2025 and full year 2025, including comments related to our expected financial results, operating expenses and free cash flow as well as our expectations for operational achievements. Our actual results may differ materially from these statements. You can find more information about risks, uncertainties and other factors that could affect our results in our most recent annual report on Form 10-K and quarterly reports on Form 10-Q filed with the SEC and available on our Investor Relations website. You should not place undue reliance on any forward-looking statements. All information in this presentation is as of today's date, May 8. We expressly disclaim any obligation to update this information. I will now turn the call over to Robert Reffkin. Robert?

Thank you for joining us today for our first quarter conference call. I'm pleased to share that in the first quarter, the gap between Compass and the industry continued to widen. In Q1, we produced record adjusted EBITDA, increased market share to record levels, grew agent count to record levels, grew the title and escrow business to record levels, retain agents at industry-leading levels, extended our unique inventory advantage and generated another quarter of positive free cash flow. Revenue in the first quarter increased by 28.7% year-over-year. Total transactions and organic transactions increased by 27.8% and 7.3% year-over-year, respectively, as compared to the overall market where transactions decreased by 2.1%. So this means Compass' total transaction count outpaced the market by close to 30% and Compass' organic transaction count outpaced the market by 9%. In Q1 2025, we generated record Q1 adjusted EBITDA of $16 million, up from the negative $20 million in the year ago quarter. Both our Q1 revenue and adjusted EBITDA came within our stated guidance ranges. In the quarter, we also successfully recruited 700 gross principal agents organically to Compass, which is up 35% year-over-year and represents one of our highest recruiting quarters for Principals. Our recruiting results this quarter illustrate that Compass' value proposition is resonating better than ever in the marketplace. Quarterly principal agent retention grew by 30 basis points year-over-year to a solid 96.6% in Q1. Momentum in our title and escrow business was strong with attach rates up 695 basis points year-over-year. And during the quarter, we also closed the Christie's International Real Estate acquisition, which, as a reminder, allows us to empower a completely new segment of the market, namely independent brokerages and broker-owner entrepreneurs across both the U.S. and international markets. Kalani will touch on our progress on synergies in the business, but I'm excited to share that in the 2.5 months since close, we have already announced that 4 new affiliates have joined the network, and I am pleased to report that our financial results and integration efforts are tracking ahead of plan. Revenue less commissions and other related expenses as a percentage of revenue in the fourth quarter was 18.4%, which is above the 17.5% reported in Q4 and above the 18.2% pro forma figure inclusive of the Christie's International business in Q4. Non-GAAP OpEx was $235 million in Q1, which includes part of the Christie's International acquisition. But more importantly, we remain on track to achieve our organic OpEx goal of 3% to 4% growth for the year. Our ability to control OpEx even while delivering significant top line growth illustrates that OpEx management has become a core competency of Compass. As we've said previously, our OpEx discipline is not temporary and is a permanent part of our strategy. Now before I dive into our long-term strategy, I would like to address NAR's decision to maintain Clear operation in late March. First, we continue to strongly and unequivocally believe in homeowner choice. I don't know a homeowner who would say they want NAR, the MLS or a portal to tell them how they must market their home. Amidst all the negative narratives and the scare tactics, the one thing you aren't going to hear is the voice of the party that is impacted the most here, the homeowner. So let me share the voice of the homeowner. After hearing about the benefits of pre-marketing, which include testing price, no days on market, no price drop history, building a buyer interest list, no algorithmic valuations lower than the list price on the listing page, no leads diverted to third-party agents that don't know the property, the question homeowners ask us is what is the downside? And so what is the downside? There is no downside. The worst thing that happens is a homeowner gets an offer and they have an opportunity to turn it down and go to the public sites with the benefit of price discovery from premarketing. That's the downside, which means there is no downside. You don't have to take an offer. You can always just reject the offer and go to the public sites with the benefit of premarketing. And that's the reason why nearly half of our clients in Q1, nearly 20,000 homeowners chose to go through the Compass 3-phase marketing strategy because there is no downside. It's just that simple. Second, I want to make clear that under NAR's updated policy as well as Zillow's new policy, office exclusives or what we have termed them as Compass Prime exclusives are still permitted. Third, Compass was founded to help agents grow their business and better serve their clients. And the Compass 3-phase marketing strategy helps agents grow their business and better serve their clients. And that's why it will only continue to grow over time. Lastly, it's important to recognize that Compass didn't make up the concept of private exclusives. Homeowners have been asking agents across brokerages and across markets for off-MLS options for decades. Compass just responded to homeowner demand in a national, systematic, tech-forward way and made off-MLS marketing options available to all homeowners through the Compass platform. Again, this isn't about what Compass wants. It's about what homeowners want. Homeowners want more choice, not less choice. And Compass believes in homeowner choice. It's hard for me to see a scenario where over time, choice doesn't win. However, portals and MLSs are now using their dominance to discourage sellers from testing off MLS marketing options, similar to how incumbents in other industries such as cable and music try to raise switching costs. In both industries, the incumbents try to block change by making it harder to leave, but that strategy only made consumers more aware of their dissatisfaction and sped up the shift off their platforms. The same is now happening in real estate. MLSs and portals are raising friction to discourage homeowners and listing agents from marketing off MLS. But that resistance is increasing the migration to off-MLS alternatives because it's making listing agents increasingly question the risk of MLS exposure for their clients, which are days on market, price drop history, diverted buyer inquiries, valuation estimates less than the value of the house. And ultimately, this is creating less trust with the people that give these platforms their inventory. Agents aren't stupid. If you need to find them and ban them to keep them on your platform, then clearly, there is something wrong with your platform. As a result, I expect over the next year to see more private listings than ever before, which will only extend Compass' inventory advantage. Now I'd like to wrap up my comments with an overview of our long-term strategy. At its core, our strategy remains unchanged and includes, first and foremost, controlling our organic OpEx at 3% to 4% annual growth even as transactions recover from 4 million existing home sales for the past 2 years back to the 5.4 million to 5.6 million mid-cycle level. We believe Compass is one of the best ways for public market investors to participate in that recovery. Secondly, Compass will continue to outgrow the market by adding agents organically, by executing accretive M&A and by using the Compass platform to enhance agent productivity. Starting with organic growth, we believe there's a long runway of incredibly talented agents that we'd love to see at Compass. On M&A, with roughly 80% of the U.S. markets generating less than $10 billion in GTV last year and only 22 brokerages generating more than $10 billion in GTV, there is a significant amount of fragmentation that exists in the brokerage market today. Our M&A pipeline remains healthy today. And as a reminder, we continue to target brokerages within the 4 to 6x EBITDA multiple range. Next, we will expand margins by increasing attach of title, escrow and mortgage while also growing the Christie's International real estate affiliate business long term, with a longer-term opportunity to stack other higher-margin revenue streams such as home insurance, home warranty, move-in services, home improvement, leads and data. In our T&E business, we are seeing evidence that we can more than double our unit economics per brokerage transaction as we integrate the business further into our platform using features such as one-click title. Here are some illustrative unit economics to consider. First, our T&E business can generate $5,000 of revenue per transaction compared to the $25,000 of revenue per transaction for a brokerage transaction on an ASP of $1 million. But given that we are targeting an adjusted EBITDA margin of 25% to 30% on each T&E transaction long term, the adjusted EBITDA contribution can actually be in line with that of a brokerage transaction over time despite the lower revenue contribution. Said another way, attaching a T&E transaction to a brokerage transaction can almost double our unit economics. Second, in addition to attaching more T&E, we also operate a mortgage JV with guaranteed rate, where longer term, we are targeting adjusted EBITDA margins in the 25% range at scale. Operating our mortgage business through a JV structure means that we don't recognize any revenue in the P&L, but the bottom line contribution can, in many cases, be higher than a T&E transaction because of how much revenue we earn per transaction. Lastly, our affiliate opportunity is a new long-tail opportunity that we believe can help us both expand into new markets in a capital-light manner and be highly accretive to our adjusted EBITDA margins as we expand the network. As we stated last quarter, we believe we can more than 5x the number of domestic Christie's International real estate affiliates over time. As a reminder, the business generates a 30% to 35% adjusted EBITDA margin for us. So bringing it all together, we believe that by sticking to our core strategy alone, we can generate hundreds and hundreds of millions in adjusted EBITDA and free cash flow for our shareholders over time. And our results over the last few quarters are showing this ramp. Also, as we have discussed in the past, we believe we can leverage our structural advantages to create increasing network effects that drive our strategy and includes our platform, our national scale, our network of top agents and depth of inventory in local markets. Now let me hand it over to Kalani to go through our financials in more detail.

Thank you, Robert. Summarizing our financial results for the quarter, our first quarter revenue was $1.36 billion, an increase of 28.7% from the year ago period. While M&A contributed to the year-over-year growth in revenue, even excluding M&A, revenue increased 14.6% on an organic basis. Despite the strong year-over-year growth, our revenue was near the low end of our revenue guidance for the quarter, which reflects some slowdown we saw in the latter half of March that we believe was due to market uncertainty driven by tariff discussions at the time. Of note, existing home sales in March for NAR were at their lowest levels of any March since 2009. And due to the seasonality of our business, the month of March always represents the largest revenue month of the first quarter. So this market volatility had a more outsized impact on our realized revenue compared to the expectations we put out in mid-February. Transactions for the quarter increased 27.8% or 7.3% on an organic basis which compares very favorably to the overall market where transactions declined by 2.1%. This outperformance of the industry is also reflected in our market share, which was 6% in the quarter, an increase of 125 basis points from the year ago period and a 95-basis point increase from Q4. Gross transaction value was $52 billion in the first quarter, an increase of 30.7% from a year ago, reflecting the 28% increase in total transactions, combined with a slight increase in average selling price of about 2.5%. Our average selling price was higher by 10% on an organic basis, but the Latter & Blum and Parks acquisitions in 2024 and the Christie's International Real Estate acquisition earlier this year, all have lower average selling prices compared to our organic businesses, which reduced the overall increase in average selling price. Our commission and other related expenses as a percent of revenue was 81.6%, an improvement of 24 basis points compared to Q1 of last year at 81.8%. Consistent with our comments last quarter, we expected the acquisition of Christie's International Real Estate to favorably impact this metric, which is reflected in the results. Excluding M&A, our commissions and other related expenses as a percent of revenue increased 38 basis points. We are okay with this trade-off today given that our highest producing agents are also taking share in the current environment. But over the long term, we also remain focused on recruiting the up-and-coming agents that come at a much better split than our highest producing agents. Our total non-GAAP operating expenses were $235 million in Q1, an increase from $211 million of OpEx in the year ago period, which was driven by M&A, including the OpEx we assumed from the January 13, 2025, acquisition of Christie's International Real Estate and the acquisition of Latter & Blum and Parks Real Estate in the second quarter of 2024. It's worth repeating that we remain maniacally focused on keeping our annual organic OpEx growth to 3% to 4%, excluding the impact of M&A. And based on our Q1 results, we are tracking in line with this goal. We are also making good progress on our integration work with Christie's International Real Estate acquisition, and we're tracking ahead of our stated synergy goals when we announced this transaction. I'm very pleased with how well the respective teams are working together in such a short time frame since the January closing for what has been the largest acquisition we've done. When modeling OpEx for the year, keep in mind that the Christie's International Real Estate acquisition was completed on January 13, so only half a month of January's OpEx is reflected in Q1. Also as a reminder, while much of our OpEx is somewhat fixed in nature, there is some seasonality related to the timing of our annual employee compensation cycles and the timing of when agent marketing expenses are incurred, such that we tend to see a slight step-up in OpEx for Q2 compared to Q1. Our adjusted EBITDA for the first quarter was a new record for us as it was the first time we've ever achieved positive adjusted EBITDA in the first quarter of any year. Adjusted EBITDA was $15.6 million, which was within our guidance range of $11 million to $25 million and a strong improvement from the loss of $20.1 million a year ago. GAAP net loss was $51 million in Q1 compared to the GAAP net loss of $133 million a year ago, which includes the $57.5 million charge for the settlement of our antitrust litigation in the year ago period. As a reminder, the non-GAAP operating results amid certain expenses that we exclude from the calculation of adjusted EBITDA, which are reconciled to our GAAP operating results on Pages 12 and 13 in our Q1 investor deck. We generated $19.5 million in free cash flow in the first quarter, which was not only an improvement over the $5.9 million of free cash flow from Q1 2024, but also a new record level of free cash flow for the first quarter. It's important to note that for the last 2 quarters, our free cash flow exceeded adjusted EBITDA levels, which is not typical. Some favorable timing of working capital changes helped with these cash flow results, and we'd expect to give back some of the favorability in Q2. Also, as a reminder, we have the second half of our class action settlement payment due in Q2 in the amount of approximately $29 million, which will negatively impact free cash flow. We ended the first quarter with $127 million of cash and cash equivalents on our balance sheet and $50 million outstanding on our revolver. The decrease in cash this quarter was largely due to the cash portion of the purchase price for the Christie's International real estate acquisition of about $150 million, which was funded by cash on hand, along with a $50 million draw on our revolver. Our weighted average share count for the first quarter was 550 million, which was in line with our guidance. As a reminder, the increase in our share count during the quarter was largely the result of 38.5 million shares, which represents the minimum number of shares that will be issued in connection with the Christie's International real estate acquisition when the equity component of the purchase price and related collar adjustments is finalized in Q1 of 2026. Turning now to financial guidance. For Q2 of 2025, we expect revenue in the range of $2 billion to $2.15 billion and expect adjusted EBITDA to be in the range of $115 million to $135 million. The revenue guide does take into consideration some of the short-term volatility and revenue growth we discussed towards the back half of March. And while we have factored in some of the volatility experienced in Q1 in the Q2 guide, it's important to note that we still expect strong year-over-year growth and believe we will continue to outpace the overall market based on our forecast and external forecasters such as MBA. Also, consider the L&B and Parks acquisition occurred in April and May of 2024, respectively. So as of Q2, we have fully anniversaried those acquisition dates. As it relates to OpEx, last quarter, we stated that we're targeting a range of $1.005 billion to $1.03 billion in total OpEx for 2025, which included the incremental OpEx from the January 2025 acquisition of Christie's International Real Estate. Since then, we've acquired Washington Fine Properties and a title company in Texas that will collectively add OpEx of about $12 million, resulting in an updated full year range of $1.017 billion to $1.042 billion. Importantly, we expect our organic like-for-like OpEx to grow in the 3% to 4% range, in line with our stated goal. We expect our weighted average share count for the second quarter to be between 560 million to 563 million shares. As a last point on guidance, we expect our stock-based compensation expense to be in the $55 million range for the second quarter, which is an increase from the $30.4 million level from Q1. This increase is driven by the accounting rules for stock-based compensation. And importantly, it does not change the anticipated dilution, which is expected to continue to approximate the 1% of additional dilution per quarter we've been guiding to. To expand on this a little further, as a reminder, in 2022, we changed our method for employee equity grants to minimize the number of shares used from our authorized pool at the time when our stock price was down significantly. This resulted in no change to how we compensate our employees and no difference in the time period the shares vest to the employees, but it allowed us to issue fewer shares upfront. However, now that our share price has recovered nicely, we have reverted back to our prior method of annual grants. And in Q2, we plan to grant the remaining share commitments for the prior years under our changed methodology. All that said, the accounting rules require us to set the amount of stock-based compensation based on the stock price at the time of grant, not at the time of commitment. And therefore, there is a timing difference between when the shares over these past couple of years were committed to when the stock was below $4, which is what drives dilution versus when they're being granted at higher price points as high as $9 per share recently, and that is what drives the stock-based compensation. So again, to recap this, we've been guiding that the quarterly dilution for employee stock compensation has about 1% of the outstanding and that will continue at those levels despite the increase you'll see in stock-based compensation lines. Importantly, and I want to make sure we're crystal clear here, while the company's stock-based compensation levels are generally indicators of dilution, that isn't the case here since the step-up in stock-based compensation is more of an accounting practice related item. We expect to see the quarterly stock-based compensation at this new level for the balance of 2025, and it will step down in 2026 and again in 2027 as these awards that were granted with a higher stock price vest out. Over the longer term, we expect to manage stock-based compensation at closer to the $100 million level annually. As Robert stated in the call, Compass continues to execute against our strategy and our record results confirm that we are focused on the right strategic priorities and are executing our strategies with excellence. Our record results are the clear result of the hard work of our incredible agents and the dedication of our team members who work tirelessly to deliver our mission. Thank you to our agents and employees for all you do for Compass. I would now like to turn the call over to the operator to begin Q&A.

[Operator Instructions] Your first question comes from the line of Chris Kuntarich from UBS.

Let's start on the 1Q revenue. Could you just help us think about what was revenue growth tracking to ahead of the disruption in the latter half of March? And then as we think about the 2Q guide, what is revenue growth tracking in April?

I'll start it, and I'll pass on to you, Kalani. Well, it's not a surprise that there is volatility in March and April. The talk of tariffs impacted March; the actual tariffs impacted April. We saw the S&P 500 down almost 17% and NASDAQ down more than 20% through the first week of April and March was also the lowest March on record in terms of transactions since 2009. I think overall, what I believe we will see is this year to look a lot like last year. Prices will be relatively flat because we have more inventory, almost 30% more inventory of single-family homes than this time last year, and that more inventory reduces the pressure on prices. And so we're seeing price relatively flat. In units, it looks like it will be just modestly up. Kalani, I'll pass it on to you.

When you look at Q1, I think we were probably tracking close to the midpoint of our guide, and then we saw some of the volatility there. I think as we think about Q2 and April, I think April is tracking at our expectations. When we look at the midpoint of our Q2 guide, we're showing some really strong growth expectations. Our Q2 guide is a little lower than Q1, but I think the factors are what you would expect. I think we have built in some of the volatility impacts that we have seen in March into April. In April, we've had day fall adjustment of Easter in April, which actually has an impact on just activity. And then Q2 was a much tougher comp year-over-year than Q1. Then finally, as expected, we anniversary Latter and Blum and our Parks acquisition. So overall, we're seeing April at our expectations and again, continue to see and expect us to outpace the market and win market share through Q2.

As we think about the disruption in the back half of March, my sense is that what you're talking about is people are putting themselves on pause when they're planning on completing a home purchase. Are you seeing any of those purchases -- like how should we be thinking about the share of purchases that were completed so far through April? And are there other case studies to look back when there were points of significant market disruption here when a part of a month or a full month has been disrupted here, how long it typically takes for some of those transactions to end up getting completed?

Look, my view is that the loss was a temporary loss of transactions, not a permanent one. And so I would expect the full year transactions to be in line with what it would have looked like otherwise, just a deferral. That is if assuming we see stability in the markets and no more surprises like we saw with the talk of tariffs and the actual tariffs. But to answer your question, I think it's more of a deferral demand, not an elimination of demand. Also, I would expect our agents to continue to gain share from agents outside of Compass. Our agents grew transactions, as mentioned earlier, 9% faster than the market or more than the market, and we expect that to continue.

Your next question comes from the line of Jason Helfstein from Oppenheimer & Co.

This is Steven Hromin on for Jason. So apologies if this has been asked already as we're juggling several calls at once, could you just, if possible, level set for investors what's the latest with NAR's clear cooperation policy? And is your legal standing, for lack of a better term, of the 3-phase marketing strategy still intact?

I think I appreciate the legal standing because yes, they're not laws. NAR is not the government. They're not elected officials. So I appreciate that. The CCP is ongoing. NAR added layer of flexibility to expand choice. It's worth noting, as mentioned on the call earlier, 3-phase marketing strategy works under CCP and all of the current rules, private exclusives coming in tons, then moving to the MLS and the portal sites. As I mentioned earlier, in my prepared remarks, homeowners are looking for more choice. They're not looking for less choice and Compass supports homeowner choice. And the Compass 3-phase marketing strategy does exactly that instead of just one launch, you get 3 launches, and you get a test price privately without the risk of days on market or price drops. 36% of the homes on the market right now, single-family homes have a price drop. They all look like damaged goods. And when it's Compass private exclusive, it's Compass coming soon, there's no days on market. There's no price drop history. And so it protects homeowners from that risk. Again, homeowners should have the choice on how to market their private property. It's their home, it's their private property. It's often their most valuable asset, and Compass stands for homeowner choice.

Your next question comes from the line of Bernie McTernan from Needham & Company.

Robert, just to follow up on that. So I get the point that 3-phase marketing is still a priority. But are you okay with your houses or with inventory not being available on Zillow or just what the response has been from agents? Just trying to -- as things are still being worked out in the industry, what's happening real time?

So again, this is about choice versus control. Compass stands for homeowner choice. And so homeowners have a choice on how to market their home. You can market your home with a 3-phase market strategy, you can market it without a 3-phase market strategy. You can market it with a 3-phase marketing strategy where it goes to Zillow and everyone else. You can market in a different way. It's the homeowner's choice. And so this is about choice, again, versus control. And I don't know a homeowner who wants NAR, MLS or a portal to tell them how to market their home.

Post these NAR changes, has there been any change in the organic recruiting effort for the company? I'm assuming that 3-phase marketing was a big push and not sure -- and I just want to see if agents are still responding to that value proposition.

I think you can see that the percentage of homeowners working with their agents to market their home, having elected to use the Compass phase marketing strategy and see that from those numbers that the demand continues to be strong. I think what I would say are top agents, luxury agents, it resonates more with them because clearly, the benefits of testing price premarketing, the higher up the price point, the more it tends to resonate, although it resonates across price points more in the luxury segment. So I think we continue to see that attraction. And look, I'm pleased to see other brokerages. I mean, you know the names of them, other great national brokerages with national presence offering choice and following Compass' position that homeowners should have more options than one option. And so premarketing and testing price through alternative listing methods has been adopted and there have been announcements from other major brokerage firms along those lines over the last few months. And I think that's a good thing for homeowner choice.

Bernie, I would also add everything Robert said. I would also add we saw 700 organic agent adds this quarter. As we've said, we expect 6 to 7 plus 100. We continue to see momentum there. The reasons have not changed. Our platform, our technology continues to be the strongest asset for agent recruiting. We see a ton of momentum there. Our inventory strategy, the depth of inventory, the 3-phase marketing, we continue to hear a lot of strong stories there helping recruiting. And then also I think it's important to note that we are seeing competitors struggle to create value for agents, and that's beginning to be a trend. A number of large brokers are cutting cost. Smaller brokers are lacking the tools and resources to invest. And while that's happening, I think we're making sure and agents are seeing that Compass is investing in agents, launching new technology, new tools, acquiring companies and advancing our strategy around that inventory. So I think we are seeing continued favorable trends that we saw in Q4 and Q1, and that hasn't stopped in Q2.

One more, if I could, just a quick one, the clarification on OpEx. Kalani, I know you mentioned now seasonality, 2Q is normally higher than 3Q. Should 2Q be that number that we can kind of run rate for the rest of the year? Or should we expect an additional step-up from seasonality in the second half?

Yes. Q2 is probably the right proxy overall. Bernie, I would point you to we guided to kind of annualized, but that's probably the right proxy generally just because Q2 has the compensation level changes in Q2. So I would use Q2 to be able to force through the annual guidance that we have to smooth out the remaining quarters.

Your next question comes from the line of Michael Ng from Goldman Sachs.

First, I wanted to ask about the principal agents and agent recruitment. I certainly appreciate the disclosures around the gross adds as a result of Christie's and the organic adds. I was wondering if you could just talk a little bit about churn trends in the quarter and if there was anything unusual that you would point to that may have caused churn in the quarter, whether the environment or the deal itself? And then second, one for Robert. Just on the 3-phase marketing strategy, as you roll this out over the next couple of months and year, I was wondering if you could talk a little bit about what your yardstick for success of the strategy is, whether that's agent recruitment or Compass market share gains. Would just love to hear a little bit more about that.

Maybe I'll start with the first question, and I'll pass on to Kalani for the second. Compass exists to make agents more successful. If we cannot make agents more successful, we have no reason to exist. We're here to help agents realize their entrepreneurial potential. The Compass 3-phase marketing strategy does that. The unintended consequence of NAR rules, rules like CCP are agents all look the same. On their own listings, their names are almost invisible on third-party sites. If they put a photo -- if their headshot is in their photo or their signs in a photo or a video that they put into MLS, MLS will take it down, so they make them invisible. They can't watermark their own photos, then MLS watermarks it. And so with the Compass 3-phase marketing strategy, it helps them differentiate. Instead of a one-size-fits all world where every agent works with their seller and just puts it in the MLS, and that's their marketing plan, we have a 3-phase marketing plan with a lot of different benefits and strategies within each phase if you choose to use it. You can test price privately, no days of market, no price drop history. We could build an interest list. When other agent wait weeks to put it into the MLS, the second we sign this listing agreement, we can put it in as a private exclusive and already start getting feedback on how the home is positioned. And so this is a tool -- there's an agent that said, our top 10 agents said, "The answer to every client objection is private exclusives. You want to list it at $5 million, the comps are saying $4.5 million. Hey, well, let's test price privately as a private exclusive." So what success looks like is that our agents continue to have an edge, that our agents continue to differentiate, that our agents continue to outperform as we saw last quarter and that our agents continue to get more listings as we can see in the data, and they continue to sell those listings at more attractive terms for the seller. So that is what success looks like. And because it's creating that success is why it will continue despite organized real estate's deep desire to restrict them and their homeowners from having choice. Kalani?

Just on your question on churn, look, I think you've heard it. We're pleased with the 700 gross agent adds, particularly in Q1. It's just showing the power of our platform and inventory strategy. I think my favorite sub metric there is with Christie's International Real estate, we've added agents instead of churn. So that's the real positive. The churn we saw in Q1 was right in line with our historical levels. When we look at it, I think just recall that Q1 is typically when we go through our renewal process, beginning of the year, so we typically see the highest amount of churn in first quarter. But to be completely transparent, we were laying on top of each other quarter 1 last year, quarter 1 this year on churn. So no significant change.

[Operator Instructions] Your next question comes from the line of Elizabeth Langan from Barclays.

This is Elizabeth on for Matt today. I did have a couple of questions actually about the private exclusive listings. I know that that's kind of been a topic on the call so far. But I was wondering if you could talk about how agents are actually using it. Are you seeing people actually get those offers while they're marketing it privately? Or are you still seeing people migrate to the public listings after going through that 3-phase marketing?

Organized real estate which are entities that use agents' listings to create market power to charge agents dues or to take their listings and monetize the homeowners listings through referrals and selling leads. Organized real estate would have you believe that the only reason why people do private exclusives is double in deals. The majority of our transactions that close as a private exclusive are co-broked with an agent at another brokerage firm. And to help dispute that fact, and we encourage that we want to co-broke. We co-broke with everyone. 94% of our listings, including the listings that start off as Compass Private exclusives get to the MLS and the portal sites, the Phase 3. What I would highlight is it's not the 1 phase market strategy. It's the 3-phase market strategy. The goal is to get to the third phase. When it's a private exclusive, NAR is now allowing us, which is great, to be able to share one-on-one our private exclusives with agents at other companies. And so I would expect that the vast majority of our private exclusives are shared with other brokerages one-on-one. And we launched a digital book, and it's also a print one, but in our office to help dispute the claim that this is about doubling deals, and we're inviting any agent from other brokerage firms to come over and look at our listings. Again, we want to co-broke with everyone. Contrary to what it may look like from the outside, CCP or Clear Cooperation is not a rule against private listings. If you can ask any agent, "How long can you do a private listing?" They'll say, "For as long as you want." But then you ask them the question, "How long can you publicly market a listing that's not MLS?" They'll say 1 day. So Clear Cooperation is not a rule against private listings. That's the marketing campaign they use. It means that's the marketing campaign of NAR. What Clear Cooperation is, it's a rule against marketing a listing in any way outside of the MLS. And so the rule does make it hard to cooperate with agents outside of MLS and their rules with days on market price drive history, not letting an agent have their face in their own photos, not letting them begin their own videos, not being able to own their own photos, like list could go on and on. But the goal is not to double in deals and to do inside deals. The goal is to give homeowners an alternative marketing method outside of just a single MLS. MLS is a great marketing tool. It's a wonderful marketing tool. And I'd say half the MLSs give flexibility that I'm 100% aligned with. But there's another half that have rules and restrictions that deeply hurt homeowners. And the 3-phase marketing strategy is a way to get out from under the thumb of these rules that are anti-homeowner, which I'll close by saying Clear Cooperation does not have any restrictions for developers or homebuilders. Developers and homebuilders are the smartest, most sophisticated and the most profit-driven people in real estate. They've been carved out of Clear Cooperation the entire time. And so that's just not fair. It's not right. And so that's really what success looks like. In addition to giving our agents an edge that they can give to their clients, what success looks like is individual homeowners are able to have all the marketing flexibility that a big developer and $1 billion homebuilder would have.

I did have a follow-up. I wanted to touch on market share. Obviously, you've seen it move higher into this quarter. But in the context of M&A and expanding your platform through transactions how are you thinking about it given the context of today's market? Are you seeing interesting things come up or like reasonable pricing just given all of the uncertainty or have things pulled down a little bit?

Overall market share, we're obviously pleased 6% in the quarter and a significant increase quarter-over-quarter, year-over-year. We expect to see that continued market share gains, both organically and then through acquisition. And I think we're seeing a market where the best agents are winning more listings, and we continue to see our top agents produce. And quite frankly, I think we'll see a continued trend similar to the last few quarters in market share based on both our productivity of our agents, our organic agent adds as well as our M&A activity.

There are no further questions at this time. I will now turn the call back to Robert Reffkin for closing remarks.

Well, thank you, everyone, for joining our call today. I want to end by thanking all of our employees and agents for their hard work. As you can see from our Q1 results, Compass is continuing to outperform the market, and we're using our platform to give our agents an edge in the industry. We have a long runway for growth, and we look forward to updating everyone on our progress. Thank you, and have a great rest of your day.

This concludes today's call. Thank you for attending. You may now disconnect.