Okay, let's get started. I'm Daily, J.P. Morgan's Internet and Online Real Estate Analyst. Today we're pleased to have with us Robert Reffkin, founder and CEO of Compass. Robert founded Compass in 2012, and by empowering agents with technology and creating a strong culture, grew Compass to be one of the largest real estate brokerages in the United States. With that, we'll get started. Welcome, Robert.
Thank you. Glad to be here.
All right. Awesome. Robert, thank you for being here today. Just maybe to kick it off, for investors that are not as familiar with your story or your company, can you please provide an overview on Compass, your platform, and the industry in which you operate?
Yeah, so at Compass, we're the largest independent brokerage firm in the country for four years in a row by sold volume. Our clients are agents. We exist to help agents grow their business, to give them an advantage, to give them an edge with their buyers and their sellers. Everything that we do is in the spirit of helping agents. My mom is an agent and has been nearly my entire life. I've been driven to help make them succeed. She's still an agent today, actually, at Compass. Agents in the country generate $100 billion of commissions, and then they split a percentage of that with brokerage firms. We take a percentage of what they make based off the value that we provide them.
In addition to the brokerage commission, there is also agents are at the center of what I would call the referral economy: mortgage, title, home insurance, home security, home warranty. They're either directly or indirectly referring the majority of those other services that are either required to make the transaction happen or optional after the transaction happens. On title and escrow alone, there's another $80 billion of volume from the commission that agents generate. That's the title officer, loan officer. We have title and loan as well. In total, we have 6% market share in the country, and we have 37,000 agents. We've invested $1.7 billion into the technology platform over the last 12 years. The platform for an agent, the average agent uses 11 different tools to do their job. With the Compass platform, they can use one.
It helps them grow their business and save time and lower their operating costs when they have to pay less of these entities. Instead of having to have two assistants, you could have one because they're more efficient.
Okay, that's great. With that as an overview, and before we dig into your business, let's talk about your first quarter results. You guys reported it last week. It was a record first quarter. Could you provide us with a quick recap of what happened, what happened through Q1, and what you're seeing so far in Q2?
Yeah, so we had record revenue, I'm sorry, record EBITDA, record free cash flow. Our market share grew to the highest levels we've had in a Q1 period. We had our transactions increase organically at 7% when the market was down 2%. It grew 9% faster than the market on an organic basis. Inorganic overall, including inorganic, was a 28% increase year over year versus market down 2%, so 30% higher. That inorganic comes from accretive M&A. We target 4-6 times EBITDA multiples. We had our attach of title and escrow increase 700 basis points to two data points. One, we created One-Click Title. In the platform, you can order your title and escrow. For people that use One-Click Title, they use our title two times as much as those that do not. Platform-driven attach has proven to create more attach.
For Compass Private Exclusives, they use our in-house title more than those that do not.
Okay. Let's touch on your overall transaction growth. It was very strong in Q1. I was curious to hear the details of how you're able to deliver that growth and how you plan on achieving similar high levels of growth going forward.
In terms of the pillars of growth, you have one, just the overall market. Right now, unfortunately, we've had two years of 4 million existing home sales. In the last 30 years, in terms of units, this is the lowest it's been. Last year was the lowest it had been in 29 years, even though the population is more than 20% larger. That reflects a lot of pent-up demand. That mid-cycle has around 5.4-5.6 million homes. Just getting from where we are right now to mid-cycle increases 35% of the units. That's one. Two, in addition to that, we're not just waiting for the market to return. We're also growing organically. We hired 700 principal agents last quarter. A principal agent often has team members on their team, but we count them as principals.
That's the person that we enter the economic relationship with. The 700 people that we brought on produce on average two and a half times more than the people that left. So we're bringing on more top producers relative to the people that are leaving. Three, we are helping them grow their business when they're here. And so they're gaining market share. Again, I would think about the organic basis, the 7% organic growth relative to the 2% down market. So when they come here, they're growing market share. And lastly, accretive M&A, where we target 4-6 times EBITDA multiples. In the last 12 months, we acquired two companies that were number one in their markets. Actually, three companies, but two were number one in their markets and just in those markets.
We acquired Christie's International Real Estate, which was number one in one market and affiliate revenue across many, many markets.
Okay. Let's stay on the topic of agents since it's so core to Compass, right? You did see impressive agent growth and high retention in 2024 and so far in 2025, and again, in a depressed market. Curious, what's bringing or attracting agents to your platform, and how does Compass maintain its agent value proposition and retention rate, and particularly among the high-producing agents?
Yeah, there are studies out there that show that the average brokerage firm loses 30% of their agents a year or only retains 70% of agents a year. At Compass, we had 97% agent retention last quarter. We're very proud of that. The reason people come and stay to Compass, the number one reason is the platform. Every agent that comes to Compass, we ask them, what are their number one, two, and three reasons why you come? Number one is the platform. It will help you save time.
What they say is, "It'll help me save time and lower my operating costs and help me grow my business with a CRM and it's an end-to-end platform from first contact to cash for your buy-side workflows and your sell-side workflows." What that would include are on the sell side, a listing presentation platform, we call CMA Evaluation, the digital ads to market the property, Marketing Center to create all the different marketing assets, whether it's social or organic or print. You could do it through the platform. Tens of thousands of different templates. All the transaction management software, open house app, mobile app, Compass two-phase marketing strategy, reverse prospecting, and much more all the way to cash. On the buy side, it's the classic search you would understand.
We call it collections, where you have a collaborative search in your platform back and forth, where whenever there's a status change or a comment, you get notified. You have your Compass tours, where every tour that you create for your agent, for your client, it lives in one place with all the comments. You can take photos of the different listings. It all lives there with the comments and all the different tours that you've had over time with all the different directions. Transaction management, offer management, all the way through close. It all lives in what we've launched called Compass One, where it's the first for consumers. We started building for agents, but now we build for consumers, or now we've helped them with their clients. At first, it was the end-to-end transaction for the agent.
Now with Compass One, an agent can go to you and say, "We can give you 24/7 transparency into every step of the process, before, during, or after the transaction, the entire transaction timeline, all in one place." So now we give that to the client. The number one reason why agents come to Compass is indisputably the platform. If you look in the last five years, every year that's gone by, the amount of minutes per month, minutes per week, minutes per year that agents spend on our platform has increased. What gives us a very strong advantage is I think the traditional brokerage firm model that does not have technology, I think, is struggling to give enough value to agents for agents to feel like the value is worth what they're paying.
A different way to say it is a traditional brokerage firm that hires, let's say, a marketing person. A marketing person can only make one agent happy at a time and for that fixed cost, while technology can make 37,000 agents happy at the exact same time. This thing that we invested in that no one else invested nearly a fraction in, in the brokerage space, it is creating sustainable and scalable happiness with our agents, our clients, in a way that other traditional brokerage firms have not been able to replicate.
Okay. I guess just to follow up on that, I mean, I don't think it's a secret that technology and the platform is your moat and your advantage. Why is it so hard for legacy platforms to replicate what you guys do?
I think at this point, I think many, not all, but many traditional brokerage firms did not have the DNA, the capital, or the vision to build the platform. My co-founder, Ori Allon, he sold one company to Twitter, another company to Google. I worked at McKinsey, Goldman Sachs, worked in the White House as a White House fellow. We came together to invest in this space. When we thought about investing in this space, the question that was asked, two questions kind of led to our current model. One is, Ori asked, if you're—he said, we raised at the time as the largest seed financing round in the country. He said, if you can take this capital, and we hired a lot of people from companies like Google, Twitter, McKinsey, Goldman.
He said, we take the capital, the financial and human capital, and we help agents grow their business. If we help them make money, if we can make them successful, we'll be successful. If we help them grow, will we grow? I said, yes, because we have share in the revenue. The second question he asked is, if you're being chased by a bear, you need to be faster than the second person. If we go this route, who's the second person? I said, look, I think it would be a traditional brokerage firm like X. I don't want to mention the name out of respect, but think of a top four brand that's a brokerage in your market. He said, that'd be great because traditional brokerage firms like X don't move very fast.
What we did is we hired agents and we said, what do you want us to build that would help you grow your business? We did that over 12 years and with our in-house software engineering team. Now we're at a point where I think maybe 15 years ago, the traditional brokerage firms could have done this. They had the capital, they had the margin, but now we're at a place where they do not. It is truly impossible. We have already invested in this. We do not need to invest as much as we have in the past. Quite frankly, we can invest—yeah, we do not need to invest as much as we have in the past.
Yeah, so it's in your DNA. All right. So let's talk about.
I think when I say like DNA, vision, and capital, I think the view 15 years ago was we do not need to invest in that thing called technology. The view we had was the year after Andreessen Horowitz, I forget which one it was, wrote Software is Eating the World. Remember the whole Wall Street Journal op-ed? I am sure many people here remember it. He walked through all these different industries where software was eating everyone's lunch. At the time, I was Chief of Staff to Gary Cohn at Goldman Sachs. We were traveling around the world. Lloyd covered half the country. Gary covered the other half. We would just meet all the CEOs. The most common theme was how software, how some company in software was disrupting their space.
Reading that article, seeing that firsthand, seeing Ori sell a company to Google and Twitter, both within effectively a year of creating it, it was very clear to me that software is going to transform, obviously, every industry, but it is going to help professionals across every industry accomplish more. This huge industry of $100 billion of commissions, where it is directly and then indirectly another $80 billion just of mortgage entitlements, so much more when you take the other integrated services, these agents are the center of this entire transaction and no company was focused on helping to empower them. You could even see with "the disruptors." All the disruptors that came in space, you could think of the names, they started trying to replace agents. Now the agents are the center of their transaction, right? Just a matter of how they try to move in.
We're just coming from the other end.
Got it. Okay. Let's talk about another area where you're trying to disrupt the market. So your three-phase marketing strategy.
Improve the market.
Improve the market.
Yeah.
Okay. You said almost half of your clients in Q1 went through the three-phase marketing strategy. And it is a relatively new strategy for you guys. To inform the audience, can you first explain what that is and how you've been able to find success so quickly as you've only been at it since last year?
Yes. We launched the Compass three-phase marketing strategy in November. In Q1, just two months later, we saw in Q1 almost 50% of all of our listings go through the three-phase marketing strategy. What the three-phase marketing strategy is, if you're a seller, I'd come to you and say, as an agent, "Hey, great news. Now that I'm at Compass, we can market—it's up to you, it's your choice—but we can market first as a private exclusive, then as a Compass Coming Soon, and then we'll go to the MLS and the portal sites." How would you do that and why? As a private exclusive, you can test an aspirational price without the risk of price drops or days on market. You think your house is worth $4 million? Great. The comps say $3.8 million or $3.6 million.
If you go straight to the MLS and portals and you're wrong, then you'll look like damaged goods. You'll have a price drop and long days in market. We in your market, we have 25% market share. We can test privately that aspirational price without the risk. Sometimes you'll find in this stage a buyer that will pay a premium to not have competition. Who will pay a premium to have certainty? Here's an example. Luxury property, $15 million penthouse, Four Seasons. Billionaire buyer flies in, offers $14.2 million to one of our agents, Aaron Kruger. Aaron Kruger says, "I'm sorry, my client will take nothing less than full ask, $15 million. Anything less than that in the next 24 hours, and I'll put it in the MLS, and you can compete against everybody else." That's marketing. Exclusivity, scarcity, tension.
There's a reason why Chanel doesn't put their bags on Amazon. There's a reason why developers and home builders sold over 300,000 homes off the MLS last year. Phase two, we're going to put on Compass Coming Soon, where it's available to all agents and buyers on the internet. You can do it under the Clear Cooperation Policy for up to one business day. After that, we'll put it on the MLS and the portals.
Okay. You just mentioned clear cooperation policy. Let's talk about that real quick. It's something that the NAR updated last late March, but there still seems to be a lot of confusion and misconception around what CCP is. Can you explain to the audience what CCP is and what it means for your private exclusives?
Yeah. So clear cooperation policy is a rule to prevent public marketing outside of the MLS. It allows Compass and all agents to have private listings for as long as they want. If you want to publicly market outside of the MLS listing system for more than one day, that's not okay. Why is that? In states like Arizona, 97% of agents are paying members of NAR because in all but four states, there's the NAR three-way agreement that says if you want to access your MLS, which every agent needs to do to do their job, you have to pay your national, state, and local association, NAR, state and local. The reason NAR created the clear cooperation is so that, or at least this is what a judge said, that it precludes competition from new listing services, Judge Florin's plan.
If every agent in the country could get their listings and give listings to a national listing system, not one of 500, how many of them would not pay NAR? It would not be 97%. There is no other large trade association with 97% people being members. The average trade association is 15%. What you have is people, entities, organized real estate, creating rules so they can monetize the people that are selling homes and the people doing the work, whether it is through agent dues or through leads off of their listings. There are 1.6 million agents that are in NAR. Last year, 71% of them did not do one transaction. The only transaction they did was pay NAR and pay the MLS.
This year, because the best agents are gaining more market share, so far this year, at least as of last month, 94% of agents hadn't done one transaction.
Okay. And then just to be clear, your three-phase marketing strategy operates within the rule of.
Oh, absolutely. Yes. See, clear cooperation is a rule that creates more private listings because it doesn't let you publicly market off the MLS. You could only market privately. So clear cooperation and any rule that enforces clear cooperation just creates more private listings. The example I would give you is if you have a house in Florida, let's say it's been on the market for 100 days. If I'm your agent, I may talk to you, "Hey, June, July, August, buyers aren't buying that often in June, July, August. How about we take it off the MLS?" So you don't have days on market unnecessarily. If it wasn't for CCP, we could put that on our public site. I could have it on social media. Everyone could see it. It could be my personal website. I can email it everywhere.
With CCP and those that enforce CCP, now it has to be a Compass Private Exclusive at Compass. Clear Cooperation is a rule that creates more private listings. For anyone who thinks private listings help companies that are big or that do private listings, CCP is helping those companies.
Okay. Then another area of confusion that I have to ask, since I cover Zillow. Zillow has taken a public stance on this with their listing standards. How does their decision affect you guys?
First of all, Zillow and Compass, we have coexisted. We will continue to coexist. The world that they are enforcing is the rule of CCP. We just walk through, in CCP, you still have Compass Private Exclusives. You still have Compass Coming Soons before it goes to the portals. The Compass three-phase marketing strategy continues to work within the Zillow listing standards.
Okay. That's good to hear. All right. That was a lot of details and a lot of industry dynamics that's a bit confusing to work through. But cutting through all of that noise, how does all of this benefit your agents and ultimately Compass at the end of the day? And you've been very vocal about private exclusives. Why is this something worth fighting for?
Yeah. The word private exclusive is the product. What I'm vocal about is choice. All private exclusive is just a choice, choice versus control. I believe the moral and the financial coincide. I believe when you offer more choice, I don't know a seller who wants less choice. I don't know a seller who wants more choice. I don't know a seller who wants less options. I know they want more options. I know for certain as the company that probably has more private exclusives than anyone else, I know that it helps. I know that it helps agents get more listings. We've shared publicly that our listings that go through the Compass three-phase marketing strategy are associated with 2.9% higher prices, that they sell 20% faster to go into contract, and they have price drops 30% less of the time.
It's associated with higher attach of title and mortgage. We see a lot of other benefits to it as well. You can't have benefits to a company if you don't have benefits to the agent. That's very important to appreciate. Compass only exists to give agents advantage. I want all the best agents to want to work at Compass, and I want them to say Compass helps them be better. Anything that helps Compass has to help agents. Anything that helps agents helps Compass. We're 100% aligned. I've been vocal on this because homeowners want it. If homeowners didn't, the fact that almost 50% of homeowners elected to go through the three-phase marketing strategy makes it clear that the demand is clear. It's not Compass asking for it. Nothing Compass has ever created has been from Compass. Or very little.
We do a great job of looking and asking our agents, saying, "What are you doing in your market, and how can we bring that idea to life in this company?" Compass Concierge, Compass Collections, Compass three-phase marketing strategy, Compass Coming Soon, Compass Private Exclusives, the Compass Platform, Compass One, Compass referral network, our luxury events, our top 100 events, our national Compass retreat. Everything we observed is amazing to the industry of real estate and said, "This thing here helps agents. Let's do it in a national way.
Okay. So you're listening to the sellers and agents and giving them what they want. And this is driving agents to your platform, right? Three-phase marketing. It is part of your agent growth driver?
Yeah. Agents find incredible value in being able to go to their sellers and offer the three-phase marketing strategy. If you're a room of 100 agents and I ask you, "How much?" I travel generally, call it two to three days a week, meet a lot of agents in big rooms like this. If I ask a group of 100 agents, "How many of you would say not that the Compass three-phase marketing strategy helped you? No, that the Compass three-phase marketing strategy, that because of it, you were able to get a listing that you probably wouldn't have gotten otherwise?" 90% of them will raise their hand.
All right. Exclusivity. Okay.
It's options.
More choices.
If I'm an agent at Compass and you're an agent at some other company and your marketing plan is, "Hey, my name's Jack or Jane, and I'm going to put it in the MLS." That's my marketing plan. Compass comes by and says, "We're going to have the Compass three-phase marketing strategy." The second that we sign the listing agreement, we're going to be able to start marketing the property. We're going to build a buyer interest list while the photos are developing. I'm going to have private showings from top agents across the country, across the market, and we're going to test price. We're going to be able to see how they think that the home is positioned, and then we're going to be able to bring it to market with whatever the best price is.
While someone else just puts in the MLS weeks after the listing agreement is signed, why would you not want that additional marketing? There's no downside. The worst thing that can happen to you as a seller is you get an offer, and you have an opportunity to say, "No, I don't want this offer. I want to go to the public market." There is no other downside. It's just you're marketing it earlier and longer before you go to the public market. This was learned from the developers. Developers don't just put their listing in the MLS. They pre-market it in countless different ways with their agents and with their different platforms. We just took that strategy and we put it into Compass.
Okay. All right. Let's bring it in a little bit. Talk about the housing market right now. It's depressed. And like you said, it's been depressed for two years. 2025 seems to be the same. What's your pulse on the housing market for the remainder of 2025? How does it look like?
I think we're in a good place relative to what could have happened a month ago or a month and a half ago. Last week, we saw purchase mortgage applications increase 13% year over year. That's not what it was looking like a month and a half ago. This week, we saw purchase mortgage applications increase 19% year over year. It's expanding. We all see pending contracts increase year over year. I think May, April, or I already know April, but May and June, I think will be up for sure, be up year over year.
Got it. So is 2025 an up year?
If you can tell me there's some stability in the macroeconomic landscape or it could stay where it is right now, yes.
Okay. All right. Okay. Let's talk about stability then, longer term. This is a cyclical industry, so we know things are going to get back to normal. When macro gets back to a normal level and housing market returns to that five to six million transactions, what does your earnings power look like in that kind of environment?
In the worst of markets, I mean, you know where our consensus is in EBITDA. That is in a 4 million seasonally adjusted home sale market for our current OPEX. Obviously, when you bring 35% more revenue on top of that, our OPEX growth, we're going to maintain at 3-4% organic in OPEX. In Q1, it was less than 3%. We seek to outperform there on organic OPEX. The framework I would think of as an investor is you have organic 3-4%. You have the market recovery going from 4 million to 5.4-5.5 million, 5.6 million, hopefully knock on wood, home sales. That would bring it up another 35-40%. You have accretive M&A. We have title and escrow expansion at 30% EBITDA margin, same with mortgage.
You have Christie's franchise affiliate revenue at 30-35% EBITDA margins as we expand that side of the business. What Christie's allows us to do is expand not just by hiring agents. We exist to help an agent grow their business, but Christie's lets us expand with a broker owner who does not want to sell the company, wants to continue being the CEO and owner of the company. They can become a franchise affiliate and pay the franchise affiliate fee. It lets us serve that growth as well. It gives us more channels to grow. We are making our platform more flexible so that we can bring on different types of brokerages with different types of brands and power them, I guess, in the same way that Citadel helps support many different types of investors.
We seek to do the same for many different types of agents.
Okay. And where does M&A fit in all of this?
We have a goal of 30% market share in the top 30 cities. We outlined that over the summer within a specific time frame. I think in the next two years, like the last year, we will hit that goal. M&A is probably the biggest bucket of it, not the only bucket. There are still organic ads. There is still helping your existing agent base grow their business through the productivity platform. M&A is definitely the biggest bucket.
Okay. And then just lastly, cost discipline. I think you guys publicly say you're maniacally focused on cost discipline. How important is managing cost for you? Yeah, I mean, how do you think about balance between growth and?
Yeah. Our cost discipline is not temporary. It is a permanent part of our strategy. One of the benefits of going through the cycle that we have gone through is we feel confident that it should be the permanent part of our strategy. We can still grow within the context of 3-4% OPEX. For example, we invest over $100 million in R&D a year. We are still investing, and that is just in R&D. We are bringing down our costs in other areas. The cost to serve a transaction went down around 50% in the last two years, and it is going down another 20% this year. We are using technology to bring down our costs as well. The more scale you have, the more technology can be used to bring down your costs.
Okay. All right. That's.