QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
(Address of Principal Executive Offices) |
(Zip Code) |
Title of Each Class |
Trading Symbol |
Name of Each Exchange on Which Registered | ||
The |
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer |
☒ | Smaller reporting company | ||||
Emerging growth company |
Page |
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3 |
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PART I. |
4 |
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Item 1. |
4 |
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4 |
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5 |
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6 |
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8 |
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9 |
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Item 2. |
20 |
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Item 3. |
31 |
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Item 4. |
32 |
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PART II. |
33 |
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Item 1. |
33 |
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Item 1A. |
33 |
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Item 2. |
52 |
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Item 6. |
53 |
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i |
• |
our future financial performance, including our expectations regarding our revenue, rate of growth, operating expenses including changes in sales and marketing, research and development, and general and administrative expenses (including any components of the foregoing), and our ability to achieve and sustain future profitability; |
• |
any changes in macroeconomic conditions and in U.S. residential real estate market conditions, including changes in prevailing interest rates or monetary policies; |
• |
the effects of the ongoing COVID-19 coronavirus pandemic in the markets in which we operate; |
• |
our business plan and our ability to effectively manage our expenses or grow our revenue; |
• |
anticipated trends, growth rates, and challenges in our business and in the markets in which we operate; |
• |
our ability to drive ongoing usage of our platform by agents; |
• |
our market opportunity; |
• |
our ability to expand into new domestic and international markets; |
• |
our ability to successfully develop and market our adjacent services, including with respect to any joint ventures; |
• |
our expectations regarding anticipated benefits from our mortgage business and new mortgage joint venture with Guaranteed Rate; |
• |
our ability to attract and retain agents and expand their businesses; |
• |
beliefs and objectives for future operations; |
• |
the timing and market acceptance of our products and services for our agents and their clients; |
• |
the effects of seasonal and cyclical trends on our results of operations; |
• |
our expectations concerning relationships with third parties; |
• |
our ability to maintain, protect, and enhance our intellectual property; |
• |
the effects of increased competition in our markets and our ability to compete effectively; |
• |
our ability to stay in compliance with laws and regulations that currently apply or become applicable to our business both in the United States and, if and as applicable, internationally; and |
• |
economic and industry trends, growth forecasts, or trend analysis. |
September 30, 2021 |
December 31, 2020 |
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Assets |
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Current assets |
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Cash and cash equivalents |
$ | $ | ||||||
Accounts receivable, net of allowance of $ |
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Compass Concierge receivables, net of allowance of $ |
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Other current assets |
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Total current assets |
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Property and equipment, net |
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Operating lease right-of-use |
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Intangible assets, net |
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Goodwill |
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Other non-current assets |
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Total assets |
$ | $ | ||||||
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Liabilities, Convertible Preferred Stock and Stockholders’ Equity (Deficit) |
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Current liabilities |
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Accounts payable |
$ | $ | ||||||
Commissions payable |
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Accrued expenses and other current liabilities |
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Current lease liabilities |
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Concierge credit facility |
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Total current liabilities |
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Non-current lease liabilities |
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Other non-current liabilities |
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Total liabilities |
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Commitments and contingencies (Note 6) |
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Convertible preferred stock, $ |
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Stockholders’ equity (deficit) |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
( |
) | ( |
) | ||||
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Total Compass, Inc. stockholders’ equity (deficit) |
( |
) | ||||||
Non-controlling interest |
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Total stockholders’ equity (deficit) |
( |
) | ||||||
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Total liabilities, convertible preferred stock and stockholders’ equity (deficit) |
$ | $ | ||||||
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Three Months Ended September 30, |
Nine Months Ended September 30, |
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2021 |
2020 |
2021 |
2020 |
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Revenue |
$ | $ | $ | $ | ||||||||||||
Operating expenses: |
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Commissions and other related expense |
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Sales and marketing |
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Operations and support |
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Research and development |
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General and administrative |
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Depreciation and amortization |
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Total operating expenses |
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Loss from operations |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Investment income, net |
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Interest expense |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
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Loss before income taxes |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Benefit from income taxes |
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Net loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
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Net loss per share attributable to common stockholders, basic and diluted |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
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Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted |
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Convertible Preferred Stock |
Common Stock |
Additional Paid-in Capital |
Accumulated Other Comprehensive Income |
Accumulated Deficit |
Total Compass, Inc. Stockholders’ Equity (Deficit) |
Non-controlling interest |
Total Stockholders’ Equity (Deficit) |
|||||||||||||||||||||||||||||||||
Shares |
Amount |
Shares |
Amount |
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For the three months ended September 30, 2021: |
||||||||||||||||||||||||||||||||||||||||
Balances at June 30, 2021 |
— | $ | — | $ | — | $ | $ | — | $ | ( |
) | $ | $ | — | $ | |||||||||||||||||||||||||
Net loss |
— | — | — | — | — | — | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||
Capital contribution from non-controlling interest |
— | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Issuance of stock for option exercises and RSU settlements |
— | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
Vesting of early exercised stock options |
— | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Stock-based compensation |
— | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
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Balances at September 30, 2021 |
— | $ | — | $ | — | $ | $ | — | $ | ( |
) | $ | $ | $ | ||||||||||||||||||||||||||
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For the three months ended September 30, 2020: |
||||||||||||||||||||||||||||||||||||||||
Balances at June 30, 2020 |
$ | $ | — | $ | $ | — | $ | ( |
) | $ | ( |
) | $ | — | $ | ( |
) | |||||||||||||||||||||||
Net loss |
— | — | — | — | — | — | ( |
) | ( |
) | — | ( |
) | |||||||||||||||||||||||||||
Issuance of stock for option exercises |
— | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
Stock-based compensation |
— | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
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Balances at September 30, 2020 |
$ | $ | — | $ | $ | — | $ | ( |
) | $ | ( |
) | $ | — | $ | ( |
) | |||||||||||||||||||||||
|
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Convertible Preferred Stock |
Common Stock |
Additional Paid-in Capital |
Accumulated Other Comprehensive Income |
Accumulated Deficit |
Total Compass, Inc. Stockholders’ Equity (Deficit) |
Non-controlling interest |
Total Stockholders’ Equity (Deficit) |
|||||||||||||||||||||||||||||||||
Shares |
Amount |
Shares |
Amount |
|||||||||||||||||||||||||||||||||||||
For the nine months ended September 30, 2021: |
||||||||||||||||||||||||||||||||||||||||
Balances at December 31, 2020 |
$ | $ | — | $ | $ | — | $ | ( |
) | $ | ( |
) | $ | — | $ | ( |
) | |||||||||||||||||||||||
Net loss |
— | — | — | — | — | — | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||
Capital contribution from non-controlling interest |
— | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Issuance of shares in connection with acquisitions |
— | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
Conversion of Series D convertible preferred stock |
( |
) | ( |
) | — | — | — | — | ||||||||||||||||||||||||||||||||
Conversion of convertible preferred stock to common stock in connection with the initial public offering |
( |
) | ( |
) | — | — | — | — | ||||||||||||||||||||||||||||||||
Issuance of common stock in connection with the initial public offering, net of issuance costs |
— | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
Issuance of stock for option exercises and RSU settlement s |
— | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
Early exercise of stock options |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
Vesting of early exercised stock options |
— | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Stock-based compensation |
— | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Balances at September 30, 2021 |
— | $ | — | $ | — | $ | $ | — | $ | ( |
) | $ | $ | $ | ||||||||||||||||||||||||||
For the nine months ended September 30, 2020: |
||||||||||||||||||||||||||||||||||||||||
Balances at December 31, 2019 |
$ | $ | — | $ | $ | $ | ( |
) | $ | ( |
) | $ | — | $ | ( |
) | ||||||||||||||||||||||||
Cumulative change in accounting principle (ASU 2016-13) |
— | — | — | — | — | — | ( |
) | ( |
) | — | ( |
) | |||||||||||||||||||||||||||
Net loss |
— | — | — | — | — | — | ( |
) | ( |
) | — | ( |
) | |||||||||||||||||||||||||||
Unrealized loss on investments |
— | — | — | — | — | ( |
) | — | ( |
) | — | ( |
) | |||||||||||||||||||||||||||
Issuance of shares in connection with acquisitions |
— | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
Issuance of Series G convertible preferred stock, net of issuance costs |
— | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Issuance of stock for option exercises |
— | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
Stock-based compensation |
— | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Balances at September 30, 2020 |
$ | $ | — | $ | $ | — | $ | ( |
) | $ | ( |
) | $ | — | $ | ( |
) | |||||||||||||||||||||||
Nine Months Ended September 30, |
||||||||
2021 |
2020 |
|||||||
Operating Activities |
||||||||
Net loss |
$ | ( |
) | $ | ( |
) | ||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
||||||||
Depreciation and amortization |
||||||||
Stock-based compensation |
||||||||
Change in acquisition related contingent consideration |
( |
) | ||||||
Bad debt expense |
||||||||
Amortization of debt issuance costs |
||||||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable |
( |
) | ||||||
Compass Concierge receivables |
( |
) | ||||||
Other current assets |
( |
) | ||||||
Other non-current assets |
( |
) | ( |
) | ||||
Operating lease right-of-use |
||||||||
Accounts payable |
( |
) | ( |
) | ||||
Commissions payable |
||||||||
Accrued expenses and other liabilities |
||||||||
|
|
|
|
|||||
Net cash provided by (used in) operating activities |
( |
) | ||||||
|
|
|
|
|||||
Investing Activities |
||||||||
Proceeds from sales and maturities of marketable securities |
— | |||||||
Capital expenditures |
( |
) | ( |
) | ||||
Payments for acquisitions, net of cash acquired |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Net cash (used in) provided by investing activities |
( |
) | ||||||
|
|
|
|
|||||
Financing Activities |
||||||||
Proceeds from issuance of convertible preferred stock, net of issuance costs |
— | |||||||
Proceeds from exercise and early exercise of stock options |
||||||||
Proceeds from drawdowns on Concierge credit facility |
||||||||
Repayments of drawdowns on Concierge credit facility |
( |
) | — | |||||
Payments of contingent consideration related to acquisitions |
( |
) | ( |
) | ||||
Payments of debt issuance costs for credit facilities |
( |
) | — | |||||
Proceeds from capital contribution of non-controlling interest in OriginPoint, LLC joint venture |
— | |||||||
Proceeds from issuance of common stock upon initial public offering, net of offering costs |
— | |||||||
|
|
|
|
|||||
Net cash provided by financing activities |
||||||||
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|
|
|||||
Net increase (decrease) in cash and cash equivalents |
( |
) | ||||||
Cash and cash equivalents at beginning of period |
||||||||
|
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|
|
|||||
Cash and cash equivalents at end of period |
$ | $ | ||||||
|
|
|
|
|||||
Supplemental disclosures of cash flow information: |
||||||||
Cash paid for interest |
$ | $ | — | |||||
Supplemental non-cash information: |
||||||||
Issuance of common stock for acquisitions |
$ | $ | ||||||
|
|
|
|
|||||
Conversion of convertible preferred stock in connection with initial public offering |
$ | $ | — | |||||
|
|
|
|
|||||
Conversion of Series D convertible preferred stock |
$ | $ | — | |||||
|
|
|
|
1. |
Business and Basis of Presentation |
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2021 |
2020 |
2021 |
2020 |
|||||||||||||
Opening balance |
$ | |
$ | |
$ | $ | |
|||||||||
Acquisitions |
— | — | ||||||||||||||
Payments and issuances |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Fair value (gains) losses included in net loss |
( |
) | ( |
) | ||||||||||||
Closing Balance |
$ | $ | $ | $ | ||||||||||||
September 30, 2021 |
December 31, 2020 |
|||||||
Accrued expenses and other current liabilities |
$ | |
$ | |
||||
Other non-current liabilities |
||||||||
Total contingent consideration |
$ | $ | ||||||
September 30, 2021 |
December 31, 2020 | |||
Discount rate |
||||
Weighted average discount rate |
||||
Earnings volatility |
||||
Weighted average earnings volatility |
September 30, 2021 |
||||||||||||
Shares Authorized |
Shares Issued |
Shares Outstanding |
||||||||||
Class A common stock |
||||||||||||
Class B common stock |
— | — | ||||||||||
Class C common stock |
||||||||||||
Total |
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|
December 31, 2020 |
||||||||||||
Shares Authorized |
Shares Issued |
Shares Outstanding |
||||||||||
Class A common stock |
||||||||||||
Class B common stock |
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|||||||
Total |
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|
Number of Shares |
Weighted Average Exercise Price |
Weighted Average Remaining Contract Term (in years) |
Aggregate Intrinsic Value |
|||||||||||||
Balances as of December 31, 2020 |
$ | $ | |
|||||||||||||
Granted |
||||||||||||||||
Exercised |
( |
) | ||||||||||||||
Forfeited |
( |
) | ||||||||||||||
|
|
|||||||||||||||
Balances as of September 30, 2021 |
$ | $ | ||||||||||||||
|
|
|||||||||||||||
Exercisable and vested at September 30, 2021 |
$ | $ | ||||||||||||||
|
|
Number of S |
Weighted Average Grant Date Fair Value |
|||||||
Balances as of December 31, 2020 |
$ | |||||||
Granted |
||||||||
Vested and converted to common stock |
( |
) | ||||||
Forfeited |
( |
) | ||||||
|
|
|
|
|||||
Balances as of September 30, 2021 |
$ | |||||||
|
|
|
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2021 |
2020 |
2021 |
2020 |
|||||||||||||
Commissions and other related expense |
$ | |
$ | |
$ | $ | ||||||||||
Sales and marketing |
||||||||||||||||
Operations and support |
||||||||||||||||
Research and development |
||||||||||||||||
General and administrative |
||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total stock-based compensation expense |
$ | $ | $ | |
$ | |
||||||||||
|
|
|
|
|
|
|
|
IPO Related Expense |
||||
Commissions and other related expense |
$ | |||
Sales and marketing |
||||
Operations and support |
||||
Research and development |
||||
General and administrative |
||||
|
|
|||
Total stock-based compensation expense |
$ | |
||
|
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2021 |
2020 |
2021 |
2020 |
|||||||||||||
Numerator: |
||||||||||||||||
Net loss attributable to common stockholders |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
|
|
|
|
|
|
|
|
|||||||||
Denominator: |
||||||||||||||||
Weighted-average number of shares outstanding used to compute net loss per share attributable to common stockholders, basic and diluted |
||||||||||||||||
|
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|
|
|
|
|
|
|||||||||
Net loss per share attributable to common stockholders, basic and diluted |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2021 |
2020 |
2021 |
2020 |
|||||||||||||
Convertible preferred stock |
— | — | ||||||||||||||
Outstanding stock options |
||||||||||||||||
Outstanding RSUs |
||||||||||||||||
Unvested early exercised options |
— | — | ||||||||||||||
Unvested common stock |
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|
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|
|
|||||||||
Total |
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• | No negative liens or judgements on the property; |
• | Seller’s available equity on the property; |
• | Loan to listing price ratio; |
• | FICO score (only for Concierge Capital program); and |
• | Macroeconomic conditions. |
Three Months Ended September 30, 2021 |
Nine Months Ended September 30, 2021 |
|||||||
Beginning of period |
$ | $ | ||||||
Allowances |
||||||||
Net write-offs and other |
( |
) | ( |
) | ||||
|
|
|
|
|||||
End of period |
$ | |
$ | |
||||
|
|
|
|
31-90 days |
Over 90 days |
Total Past Due |
Current |
Total |
||||||||||||||||
September 30, 2021 |
$ | |
$ | |
$ | |
$ | |
$ | |
Three Months Ended September 30, 2020 |
Nine Months Ended September 30, 2020 |
|||||||||||||||||||||||
Severance |
Lease Terminaion |
Total |
Severance |
Lease Terminaion |
Total |
|||||||||||||||||||
Sales and marketing |
$ | — | $ | $ | $ | $ | $ | |||||||||||||||||
Operations and support |
— | — | — | — | ||||||||||||||||||||
Research and development |
— | — | — | — | ||||||||||||||||||||
General and administrative |
— | — | — | — | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
$ | — | $ | |
$ | |
$ | |
$ | |
$ | |
||||||||||||
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• | Introduction. |
• | Results of Operations. |
• | Key Business Metrics and Non-GAAP Financial Measures. Non-GAAP financial measures we use to evaluate our business and measure our performance, in addition to the measures presented in our condensed consolidated financial statements. |
• | Liquidity and Capital Resources. |
• | Critical Accounting Estimates and Policies. |
• | Recent Accounting Pronouncements. |
(1) |
For the definitions of Average Number of Principal Agents, Total Transactions and Gross Transaction Value please refer to the section entitled “Key Business Metrics” included elsewhere in this Quarterly Report. |
Three Months Ended September 30, |
Nine Months Ended September 30, |
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2021 |
2020 |
2021 |
2020 |
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(in millions, except percentages) |
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Revenue |
$ | 1,743.6 | 100.0 | % | $ | 1,188.5 | 100.0 | % | $ | 4,808.9 | 100.0 | % | $ | 2,490.5 | 100.0 | % | ||||||||||||||||
Operating expenses: |
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Commissions and other related expense (1) |
1,430.6 | 82.0 | 979.4 | 82.4 | 3,963.2 | 82.4 | 2,047.2 | 82.2 | ||||||||||||||||||||||||
Sales and marketing (1) |
130.6 | 7.5 | 99.7 | 8.4 | 366.2 | 7.6 | 297.0 | 11.9 | ||||||||||||||||||||||||
Operations and support (1) |
97.0 | 5.6 | 53.3 | 4.5 | 263.7 | 5.5 | 158.9 | 6.4 | ||||||||||||||||||||||||
Research and development (1) |
89.7 | 5.1 | 33.7 | 2.8 | 259.8 | 5.4 | 106.7 | 4.3 | ||||||||||||||||||||||||
General and administrative (1) |
79.5 | 4.6 | 22.7 | 1.9 | 231.8 | 4.8 | 75.7 | 3.0 | ||||||||||||||||||||||||
Depreciation and amortization |
16.7 | 1.0 | 13.0 | 1.1 | 45.1 | 0.9 | 38.1 | 1.5 | ||||||||||||||||||||||||
Total operating expenses |
1,844.1 | 105.8 | 1,201.8 | 101.1 | 5,129.8 | 106.7 | 2,723.6 | 109.4 | ||||||||||||||||||||||||
Loss from operations |
(100.5 | ) | (5.8 | ) | (13.3 | ) | (1.1 | ) | (320.9 | ) | (6.7 | ) | (233.1 | ) | (9.4 | ) | ||||||||||||||||
Investment income, net |
0.1 | 0.0 | — | — | 0.1 | 0.0 | 2.0 | 0.1 | ||||||||||||||||||||||||
Interest expense |
(0.7 | ) | (0.0 | ) | (0.2 | ) | (0.0 | ) | (1.8 | ) | (0.0 | ) | (0.2 | ) | (0.0 | ) | ||||||||||||||||
Loss before income taxes |
(101.1 | ) | (5.8 | ) | (13.5 | ) | (1.1 | ) | (322.6 | ) | (6.7 | ) | (231.3 | ) | (9.3 | ) | ||||||||||||||||
Benefit from income taxes |
1.3 | 0.1 | — | — | 3.3 | 0.1 | 0.9 | 0.0 | ||||||||||||||||||||||||
Net loss |
$ | (99.8 | ) | -5.7 | % | $ | (13.5 | ) | -1.1 | % | $ | (319.3 | ) | -6.6 | % | $ | (230.4 | ) | -9.3 | % | ||||||||||||
(1) | Includes stock-based compensation expense as follows: |
Three Months Ended September 30, |
Nine Months Ended September 30, |
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2021 |
2020 |
2021 |
2020 |
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Commissions and other related expense |
$ | 26.3 | $ | 0.5 | $ | 82.6 | $ | 5.1 | ||||||||
Sales and marketing |
10.3 | 2.6 | 27.9 | 8.0 | ||||||||||||
Operations and support |
4.5 | 0.7 | 12.3 | 2.2 | ||||||||||||
Research and development |
13.2 | 0.3 | 76.2 | 1.1 | ||||||||||||
General and administrative |
16.8 | 2.0 | 93.9 | 13.8 | ||||||||||||
Total stock-based compensation expense |
$ | 71.1 | $ | 6.1 | $ | 292.9 | $ | 30.2 | ||||||||
IPO Related Expense |
||||
Commissions and other related expense |
$ | 41.7 | ||
Sales and marketing |
1.8 | |||
Operations and support |
3.1 | |||
Research and development |
46.9 | |||
General and administrative |
55.0 | |||
Total stock-based compensation expense |
$ | 148.5 | ||
Three Months Ended September 30, |
Nine Months Ended September 30, |
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2021 |
2020 |
$ Change |
% Change |
2021 |
2020 |
$ Change |
% Change |
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(in millions, except percentages) |
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Revenue |
$ | 1,743.6 | $ | 1,188.5 | $ | 555.1 | 46.7 | % | $ | 4,808.9 | $ | 2,490.5 | $ | 2,318.4 | 93.1 | % |
Three Months Ended September 30, |
Nine Months Ended September 30, |
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2021 |
2020 |
$ Change |
% Change |
2021 |
2020 |
$ Change |
% Change |
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(in millions, except percentages) |
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Commissions and other related expense |
$ | 1,430.6 | $ | 979.4 | $ | 451.2 | 46.1 | % | $ | 3,963.2 | $ | 2,047.2 | $ | 1,916.0 | 93.6 | % | ||||||||||||||||
Percentage of revenue |
82.0 | % | 82.4 | % | 82.4 | % | 82.2 | % |
Three Months Ended September 30, |
Nine Months Ended September 30, |
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2021 |
2020 |
$ Change |
% Change |
2021 |
2020 |
$ Change |
% Change |
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(in millions, except percentages) |
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Sales and marketing |
$ | 130.6 | $ | 99.7 | $ | 30.9 | 31.0 | % | $ | 366.2 | $ | 297.0 | $ | 69.2 | 23.3 | % | ||||||||||||||||
Percentage of revenue |
7.5 | % | 8.4 | % | 7.6 | % | 11.9 | % |
Three Months Ended September 30, |
Nine Months Ended September 30, |
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2021 |
2020 |
$ Change |
% Change |
2021 |
2020 |
$ Change |
% Change |
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(in millions, except percentages) |
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Operations and support |
$ | 97.0 | $ | 53.3 | $ | 43.7 | 82.0 | % | $ | 263.7 | $ | 158.9 | $ | 104.8 | 66.0 | % | ||||||||||||||||
Percentage of revenue |
5.6 | % | 4.5 | % | 5.5 | % | 6.4 | % |
Three Months Ended September 30, |
Nine Months Ended September 30, |
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2021 |
2020 |
$ Change |
% Change |
2021 |
2020 |
$ Change |
% Change |
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(in millions, except percentages) |
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Research and development |
$ | 89.7 | $ | 33.7 | $ | 56.0 | 166.2 | % | $ | 259.8 | $ | 106.7 | $ | 153.1 | 143.5 | % | ||||||||||||||||
Percentage of revenue |
5.1 | % | 2.8 | % | 5.4 | % | 4.3 | % |
Three Months Ended September 30, |
Nine Months Ended September 30, |
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2021 |
2020 |
$ Change |
% Change |
2021 |
2020 |
$ Change |
% Change |
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(in millions, except percentages) |
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General and administrative |
$ | 79.5 | $ | 22.7 | $ | 56.8 | 250.2 | % | $ | 231.8 | $ | 75.7 | $ | 156.1 | 206.2 | % | ||||||||||||||||
Percentage of revenue |
4.6 | % | 1.9 | % | 4.8 | % | 3.0 | % |
Three Months Ended September 30, |
Nine Months Ended September 30, |
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2021 |
2020 |
$ Change |
% Change |
2021 |
2020 |
$ Change |
% Change |
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(in millions, except percentages) |
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Depreciation and amortization |
$ | 16.7 | $ | 13.0 | $ | 3.7 | 28.5 | % | $ | 45.1 | $ | 38.1 | $ | 7.0 | 18.4 | % | ||||||||||||||||
Percentage of revenue |
1.0 | % | 1.1 | % | 0.9 | % | 1.5 | % |
Three Months Ended September 30, |
Nine Months Ended September 30, |
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2021 |
2020 |
$ Change |
% Change |
2021 |
2020 |
$ Change |
% Change |
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(in millions, except percentages) |
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Investment income, net |
$ | 0.1 | $ | — | $ | 0.1 | 100.0 | % | $ | 0.1 | $ | 2.0 | $ | (1.9 | ) | -95.0 | % |
Three Months Ended September 30, |
Nine Months Ended September 30, |
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2021 |
2020 |
$ Change |
% Change |
2021 |
2020 |
$ Change |
% Change |
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(in millions, except percentages) |
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Interest expense |
$ | (0.7 | ) | $ | (0.2 | ) | $ | (0.5 | ) | 250.0 | % | $ | (1.8 | ) | $ | (0.2 | ) | $ | (1.6 | ) | 800.0 | % |
Three Months Ended September 30, |
Nine Months Ended September 30, |
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2021 |
2020 |
$ Change |
% Change |
2021 |
2020 |
$ Change |
% Change |
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(in millions, except percentages) |
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Benefit from income taxes |
$ | 1.3 | $ | — | $ | 1.3 | 100.0 | % | $ | 3.3 | $ | 0.9 | $ | 2.4 | 266.7 | % |
Three Months Ended September 30, |
Nine Months Ended September 30, |
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2021 |
2020 |
2021 |
2020 |
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Total Transactions |
62,349 | 45,910 | 168,360 | 97,378 | ||||||||||||
Gross Transaction Value (in billions) |
$ | 69.1 | $ | 47.8 | $ | 189.9 | $ | 99.8 | ||||||||
Average Number of Principal Agents |
11,616 | 8,848 | 10,686 | 8,511 | ||||||||||||
Net Loss (in millions) |
$ | (99.8 | ) | $ | (13.5 | ) | $ | (319.3 | ) | $ | (230.4 | ) | ||||
Net Loss Margin |
-5.7 | % | -1.1 | % | -6.6 | % | -9.3 | % | ||||||||
Adjusted EBITDA (1) (in millions) |
$ | 12.2 | $ | 11.0 | $ | 52.9 | $ | (147.5 | ) | |||||||
Adjusted EBITDA Margin (1) |
0.7 | % | 0.9 | % | 1.1 | % | -5.9 | % |
(1) |
Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP financial measures. For more information regarding our use of these measures and a reconciliation of Net Loss to Adjusted EBITDA, see the section titled “—Non-GAAP Financial Measures” below. |
Three Months Ended September 30, |
Nine Months Ended September 30, |
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2021 |
2020 |
2021 |
2020 |
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Net loss |
$ | (99.8 | ) | $ | (13.5 | ) | $ | (319.3 | ) | $ | (230.4 | ) | ||||
Adjusted to exclude the following: |
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Depreciation and amortization |
16.7 | 13.0 | 45.1 | 38.1 | ||||||||||||
Investment income, net |
(0.1 | ) | — | (0.1 | ) | (2.0 | ) | |||||||||
Interest expense |
0.7 | 0.2 | 1.8 | 0.2 | ||||||||||||
Stock-based compensation |
71.1 | 6.1 | 292.9 | 30.2 | ||||||||||||
Benefit from income taxes |
(1.3 | ) | — | (3.3 | ) | (0.9 | ) | |||||||||
Restructuring charges (1) |
— | 1.2 | — | 10.2 | ||||||||||||
Acquisition-related expenses (2) |
3.6 | 4.0 | 14.5 | 7.1 | ||||||||||||
Litigation charge (3) |
21.3 | — | 21.3 | — | ||||||||||||
Adjusted EBITDA |
$ | 12.2 | $ | 11.0 | $ | 52.9 | $ | (147.5 | ) | |||||||
Net Loss Margin |
-5.7 | % | -1.1 | % | -6.6 | % | -9.3 | % | ||||||||
Adjusted EBITDA Margin |
0.7 | % | 0.9 | % | 1.1 | % | -5.9 | % | ||||||||
(1) |
Includes lease termination and severance costs. See Note 12 to our condensed consolidated financial statements included elsewhere in this Quarterly Report for more information. |
(2) |
Includes adjustments related to the change in fair value of contingent consideration and adjustments related to acquisition consideration treated as compensation expense over the underlying retention periods. See Note 3 to our condensed consolidated financial statements included elsewhere in this Quarterly Report for more information. |
(3) |
Represents a charge of $21.3 million in connection with the settlement in principle for the Litigation Matter. See Note 6 to our condensed consolidated financial statements included elsewhere in this Quarterly Report for more information. |
Three Months Ended September 30, 2021 |
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Commissions and other related expense |
Sales and marketing |
Operations and support |
Research and development |
General and administrative |
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GAAP Basis |
$ | 1,430.6 | $ | 130.6 | $ | 97.0 | $ | 89.7 | $ | 79.5 | ||||||||||
Adjusted to exclude the following: |
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Stock-based compensation |
(26.3 | ) | (10.3 | ) | (4.5 | ) | (13.2 | ) | (16.8 | ) | ||||||||||
Acquisition-related expenses |
— | — | (3.6 | ) | — | — | ||||||||||||||
Litigation charge |
— | — | — | — | (21.3 | ) | ||||||||||||||
Non-GAAP Basis |
$ | 1,404.3 | $ | 120.3 | $ | 88.9 | $ | 76.5 | $ | 41.4 | ||||||||||
Three Months Ended September 30, 2020 |
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Commissions and other related expense |
Sales and marketing |
Operations and support |
Research and development |
General and administrative |
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GAAP Basis |
$ | 979.4 | $ | 99.7 | $ | 53.3 | $ | 33.7 | $ | 22.7 | ||||||||||
Adjusted to exclude the following: |
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Stock-based compensation |
(0.5 | ) | (2.6 | ) | (0.7 | ) | (0.3 | ) | (2.0 | ) | ||||||||||
Restructuirng charges |
— | (1.2 | ) | — | — | — | ||||||||||||||
Acquisition-related expenses |
— | — | (4.0 | ) | — | — | ||||||||||||||
Non-GAAP Basis |
$ | 978.9 | $ | 95.9 | $ | 48.6 | $ | 33.4 | $ | 20.7 | ||||||||||
Nine Months Ended September 30, 2021 |
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Commissions and other related expense |
Sales and marketing |
Operations and support |
Research and development |
General and administrative |
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GAAP Basis |
$ | 3,963.2 | $ | 366.2 | $ | 263.7 | $ | 259.8 | $ | 231.8 | ||||||||||
Adjusted to exclude the following: |
||||||||||||||||||||
Stock-based compensation |
(82.6 | ) | (27.9 | ) | (12.3 | ) | (76.2 | ) | (93.9 | ) | ||||||||||
Acquisition-related expenses |
— | — | (14.5 | ) | — | — | ||||||||||||||
Litigation charge |
— | — | — | — | (21.3 | ) | ||||||||||||||
Non-GAAP Basis |
$ | 3,880.6 | $ | 338.3 | $ | 236.9 | $ | 183.6 | $ | 116.6 | ||||||||||
Nine Months Ended September 30, 2020 |
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Commissions and other related expense |
Sales and marketing |
Operations and support |
Research and development |
General and administrative |
||||||||||||||||
GAAP Basis |
$ | 2,047.2 | $ | 297.0 | $ | 158.9 | $ | 106.7 | $ | 75.7 | ||||||||||
Adjusted to exclude the following: |
||||||||||||||||||||
Stock-based compensation |
(5.1 | ) | (8.0 | ) | (2.2 | ) | (1.1 | ) | (13.8 | ) | ||||||||||
Restructuirng charges |
— | (5.7 | ) | (2.9 | ) | (0.7 | ) | (0.9 | ) | |||||||||||
Acquisition-related expenses |
— | — | (7.1 | ) | — | — | ||||||||||||||
Non-GAAP Basis |
$ | 2,042.1 | $ | 283.3 | $ | 146.7 | $ | 104.9 | $ | 61.0 | ||||||||||
Nine Months Ended September 30, |
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2021 |
2020 |
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(in millions) |
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Net cash provided by (used in) operating activities |
$ | 48.3 | $ | (88.1 | ) | |||
Net cash (used in) provided by investing activities |
(160.9 | ) | 19.9 | |||||
Net cash provided by financing activities |
463.9 | 12.8 | ||||||
Net increase (decrease) in cash and cash equivalents |
$ | 351.3 | $ | (55.4 | ) | |||
• | Our success depends on general economic conditions, the health of the U.S. real estate industry, and risks generally incident to the ownership of residential real estate, and our business may be negatively impacted by economic and industry downturns, including seasonal and cyclical trends; |
• | If we do not provide our agents with solutions that they value, we may fail to attract new agents, retain current agents or increase agents’ utilization of our platform, which may adversely affect our business, financial condition and results of operations; |
• | We have experienced rapid growth since inception which may not be indicative of our future growth. We expect that, in the future, even if our revenue increases, our rate of growth may decline; |
• | We have incurred net losses on an annual basis since we were founded, anticipate increasing our operating expenses in the future, and may not achieve or sustain profitability; |
• | We may not be able to commence our new mortgage joint venture in a timely manner or at all and may not realize the expected benefits from the new venture; |
• | If we do not innovate and continuously improve and expand our platform to create value for Compass agents and clients, our business could be negatively impacted; |
• | The COVID-19 pandemic has had a material effect on our business, and could continue to do so; |
• | We operate in highly competitive markets and we may be unable to compete successfully against competitors; |
• | Monetary policies of the federal government and its agencies may have a material impact on our business, results of operations and financial condition; |
• | Any decrease in our gross commission income or the percentage of commissions that we collect may harm our business, results of operations and financial condition; |
• | Our efforts to expand our business and offer additional adjacent services may not be successful; |
• | Our quarterly results and other operating metrics may fluctuate from quarter to quarter, which makes these difficult to predict; |
• | The loss of one or more of our key personnel, or our failure to attract and retain other highly qualified personnel in the future, could harm our business; |
• | Actions by our agents or employees could adversely affect our reputation and subject us to liability; |
• | If we pursue acquisitions that are not successfully completed or integrated into our existing operations, our business, financial condition or results of operations may be adversely affected; |
• | We are periodically subject to claims, lawsuits, government investigations and other proceedings that may adversely affect our business, financial condition and results of operations; |
• | Our agents are independent contractors, and if federal or state law mandates that they be classified as employees, our business, financial condition, and results of operations would be adversely impacted; |
• | Our intellectual property rights are valuable, and any inability to protect them could reduce the value of our products, services and brand; and |
• | The multi-class structure of our common stock will have the effect of concentrating voting power with Robert Reffkin, our founder, Chairman and Chief Executive Officer, which will limit your ability to influence the outcome of matters submitted to our stockholders for approval, including the election of our board of directors, the adoption of amendments to our certificate of incorporation and bylaws, and the approval of any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transactions. |
• | a period of slow economic growth or recessionary conditions; |
• | weak credit markets; |
• | increasing mortgage rates and down payment requirements or constraints on the availability of mortgage financing; |
• | a low level of consumer confidence in the economy or the residential real estate market due to macroeconomic events domestically or internationally; |
• | high levels of unemployment resulting from the ongoing COVID-19 pandemic and the continued slow recovery of wages; |
• | instability of financial institutions; |
• | legislative or regulatory changes (including changes in regulatory interpretations or regulatory practices) that would adversely impact the residential real estate market as well as federal and/or state income tax changes and other tax reform affecting real estate and/or real estate transactions; |
• | insufficient or excessive regional home inventory levels; |
• | high levels of foreclosure activity, including but not limited to the release of homes already held for sale by financial institutions; |
• | adverse changes in local, regional, or national economic conditions; |
• | the inability or unwillingness of consumers to enter into sale transactions due to first-time homebuyer concerns about investing in a home and move-up buyers having limited or negative equity in their existing homes; |
• | a decrease in the affordability of homes including the impact of rising mortgage rates, home price appreciation and wage stagnation or wage increases that do not keep pace with inflation; |
• | decreasing home ownership rates, declining demand for real estate and changing social attitudes toward home ownership; and |
• | natural disasters, such as hurricanes, earthquakes and other events (including pandemics and epidemics) that disrupt local or regional real estate markets. |
• | attract high-performing agents in markets we currently serve; |
• | expand to new domestic markets; |
• | improve our software and develop additional functionality; |
• | develop a broader set of solutions; |
• | execute opportunistic mergers and acquisitions; and |
• | expand internationally. |
• | declines in U.S. residential real estate transaction volumes; |
• | our expansion into new markets, for which we typically incur more significant losses immediately following entry; |
• | increased competition in the U.S. residential real estate industry; |
• | increased costs to attract and retain agents; |
• | increased research and development costs to continue to advance the capabilities of our platform; |
• | changes in our fee structure or rates; |
• | our failure to realize anticipated efficiencies through our technology and business model; |
• | failure to execute our growth strategies; |
• | increased sales and marketing costs; |
• | hiring additional personnel to support our overall growth; and |
• | unforeseen expenses, difficulties, complications and delays, and other unknown factors. |
• | increased unemployment rates and stagnant or declining wages; |
• | decreased consumer confidence in the economy and recessionary conditions; |
• | lower yields on individuals’ investment portfolios or volatility and declines in the stock market; |
• | lower rental prices in certain markets reducing demand to purchase homes; and |
• | more stringent mortgage financing conditions, including increased down payment requirements. |
• | our ability to attract and retain agents; |
• | the timing and market acceptance of our products and services for Compass agents and their clients, including new products and services offered by us or our competitors; |
• | the attractiveness of our adjacent services for agents as well as their clients; |
• | our ability to attract top engineering talent to further develop and improve our technology to support our business model; and |
• | our brand strength relative to our competitors. |
• | our ability to attract and retain agents; |
• | our ability to develop new solutions and offer new services on our platform; |
• | changes in interest rates or mortgage underwriting standards; |
• | the actions of our competitors; |
• | costs and expenses related to the strategic acquisitions, partnerships and joint ventures; |
• | increases in and timing of operating expenses that we may incur to grow and expand our operations and to remain competitive; |
• | changes in the legislative or regulatory environment, including with respect to real estate commission rates and disclosures; |
• | system failures or outages, or actual or perceived breaches of security or privacy, and the costs associated with preventing, responding to, or remediating any such outages or breaches; |
• | adverse judgments, settlements, or other litigation-related costs and the fees associated with investigating and defending claims; |
• | the overall tax rate for our business and the impact of any changes in tax laws or judicial or regulatory interpretations of tax laws, which are recorded in the period such laws are enacted or interpretations are issued and may significantly affect the effective tax rate of that period; |
• | the application of new or changing financial accounting standards or practices; and |
• | changes in regional or national business or macroeconomic conditions, including as a result of the ongoing COVID-19 pandemic, which may impact the other factors described above. |
• | the failure or significant disruption of our operations from various causes, including human error, computer malware, ransomware, insecure software and systems, zero-day vulnerabilities, threats to or disruption of third-party vendors who provide critical services, or other events related to our critical information technologies and systems; |
• | the increasing level and sophistication of cybersecurity attacks, including distributed denial of service attacks, data theft, fraud or malicious acts on the part of trusted insiders, social engineering (including phishing attempts), or other unlawful tactics aimed at compromising the systems and data of Compass agents and clients (including through systems not directly controlled by us, such as those maintained by our agents and third-party service providers); and |
• | the reputational and financial risks associated with a loss of data or material data breach (including unauthorized access to our proprietary business information or personal information of Compass agents and clients), the transmission of computer malware, or the diversion of sale transaction closing funds. |
• | We did not maintain formal accounting policies and procedures, and did not design, document and maintain controls related to substantially all of our business processes to achieve complete, accurate and timely financial accounting, reporting and disclosures, including controls over account reconciliations, segregation of duties and the preparation and review of journal entries; and |
• | We did not design and maintain effective controls over information technology, or IT, general controls or information systems and applications that are relevant to the preparation of the consolidated financial statements. Specifically, we did not design and maintain (i) program change management controls to ensure that IT program and data changes affecting financial IT applications and underlying accounting records are identified, tested, authorized and implemented appropriately that are relevant to the preparation of our financial statements, (ii) user access controls to ensure appropriate segregation of duties and that adequately restrict user and privileged access to financial applications, programs, and data to appropriate personnel, (iii) computer operations controls to ensure that critical batch jobs are monitored and data backups are authorized and monitored, and (iv) testing and approval of controls for program development to ensure that new software development is aligned with business and IT requirements. |
• | failure to identify, attract, reward and retain people in leadership positions in our organization who share and further our culture, values and mission; |
• | the increasing size and geographic diversity of our workforce; |
• | shelter-in-place |
• | the inability to achieve adherence to our internal policies and core values; |
• | the continued challenges of a rapidly-evolving industry; |
• | the increasing need to develop expertise in new areas of business that affect us; |
• | negative perception of our treatment of employees or our response to employee sentiment related to political or social causes or actions of management; and |
• | the integration of new personnel and businesses from acquisitions. |
• | significant volatility in the market price and trading volume of technology companies in general and of companies in the real estate technology industry in particular; |
• | changes in mortgage interest rates; |
• | variations in the housing market, including seasonal trends and fluctuations; |
• | announcements of new solutions, commercial relationships, acquisitions, or other events by us or our competitors; |
• | price and volume fluctuations in the overall stock market from time to time; |
• | changes in how agents perceive the benefits of our platform and future offerings; |
• | the public’s reaction to our press releases, other public announcements, and filings with the SEC; |
• | fluctuations in the trading volume of our shares or the size of our public float; |
• | sales of large blocks of our common stock; |
• | actual or anticipated changes or fluctuations in our results of operations or financial projections; |
• | changes in actual or future expectations of investors or securities analysts; |
• | litigation involving us, our industry, or both; |
• | governmental or regulatory actions or audits; |
• | regulatory developments applicable to our business, including those related to privacy in the United States or globally; |
• | general economic conditions and trends; |
• | major catastrophic events in our markets; and |
• | departures of key employees. |
• | provide that our board of directors is classified into three classes of directors with staggered three-year terms; |
• | permit the board of directors to establish the number of directors and fill any vacancies and newly-created directorships; |
• | require super-majority voting to amend some provisions in our restated certificate of incorporation and restated bylaws; |
• | authorize the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan; |
• | provide that only our chief executive officer, chairperson of our board of directors or a majority of our board of directors are authorized to call a special meeting of stockholders; |
• | eliminate the ability of our stockholders to call special meetings of stockholders; |
• | prohibit cumulative voting; |
• | provide that directors may only be removed “for cause” and only with the approval of the holders of at least two-thirds of the voting power of the then outstanding capital stock; |
• | prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders; |
• | provide that the board of directors is expressly authorized to make, alter, or repeal our bylaws; and |
• | establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings. |
Exhibit Number |
Incorporated by Reference |
Filed or Furnished Herewith |
||||||||||||
Description |
Form |
File No. |
Exhibit |
Filing Date | ||||||||||
31.1 | Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14 (a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | X | ||||||||||||
31.2 | Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | X | ||||||||||||
32.1* | Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | X | ||||||||||||
32.2* | Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | X | ||||||||||||
101.INS | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document). | X | ||||||||||||
101.SCH | Inline XBRL Taxonomy Extension Schema Document. | X | ||||||||||||
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | X | ||||||||||||
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | X | ||||||||||||
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | X | ||||||||||||
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | X | ||||||||||||
104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). | X |
* | The certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Form 10-Q and are not deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall they be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act. |
COMPASS, INC. | ||
By: | /s/ Robert Reffkin | |
Robert Reffkin | ||
Chairman and Chief Executive Officer | ||
(Principal Executive Officer) | ||
By: | /s/ Kristen Ankerbrandt | |
Kristen Ankerbrandt | ||
Chief Financial Officer | ||
(Principal Financial Officer) |