Compass revealed big losses — to the tune of $100 million — in its second quarter report. And as a result, the firm will no longer offer equity or cash incentives to new agents.
Although Compass reported a record-high quarterly revenue of $2 billion, up 4% year over year, the Generally Accepted Accounting Principles (GAAP) net loss increased substantially. Compass lost $101.1 million during Q2. For context, during this time last year, the company lost just $7 million.
Now, Compass must reduce costs substantially. New measures to curb company spending aim to save $320 million by the end of 2023, according to the press release. And in an earnings call following its publication, CEO Robert Reffkin offered more details as to how.
“Never in my time at Compass have we seen such a big downturn in such a short time,” he said, going on to identify the company’s two biggest expenses: technology and incentives to acquire new agents. Reffkin then revealed plans to cut back on both areas.
“We recently initiated the zero-incentive program which means we are now recruiting agents without equity or cash incentives,” he said. “Our ability to do this is a reflection of the value the platform provides.”
As of now, it remains unclear exactly how the Compass technology will be affected. Along with incentives, the company’s tech platform is a major enticement for new agents. In the call, Reffkin also stated that they are not reducing agents’ current service levels “to ensure our existing revenue base is not impacted.” He went on to stress the strength of Compass despite a tough quarter.
In addition to the 4% revenue bump, Compass reported an increase of 405 agents from last quarter. There are currently 12,979 Compass agents. And that growth occurred amid the news of massive layoffs; in June, Compass let go roughly 10% of its staff.
As Mike DelPrete commented in his own report, “Compass is retaining its agents … a positive sign for the company.”