Earnings Call: Q2 2021

Aug 9, 2021

Good day, and welcome to the Compass Second Quarter 2021 Earnings Conference Call. My name is Catherine, and I will be your conference operator today. All lines have been placed on mute to prevent any background Noise. After the speakers' remarks, there will be a question and answer session. Jen Barrett, Vice President of Investor Relations, you may begin your conference. Good afternoon, and thank you to everyone for joining Compass' 2nd quarter earnings call. Today's review of our actual financials will address the continuing conference. And certain items are presented on a non GAAP basis. The reconciliations between GAAP and non GAAP measures For both our Q2 and year to date financials as well as our guidance are included at the back of the earnings release and the shareholder letter. Please also see our disclosure on forward looking statements, which reflects Compass' current view of its future financial performance, Conference, which may be materially different from our actual performance for reasons that we cite in our Form 10 Q and other SEC filings, Including uncertainties posed by the COVID-nineteen pandemic and the difficulty in predicting its future force and the impact on the housing market and the global economy. Joining us today will be Robert Raskin, Compass' Founder, Chairman and Chief Executive Officer and Kristin Ankerprin, Compass' Chief Financial Officer. Robert will provide a brief overview of Compass' quarter and a discussion of our strategy and then Kristen will cover the financial results and outlook in more detail. With that, I'd like to turn the call over to Robert. Thank you, Ben, and thanks to everyone for joining the call. We are excited to be back with you today to talk about Compass and our 2nd quarter results. Thanks to our agents and employees' hard work throughout the quarter, We were able to deliver record results in terms of transactions, gross transaction value, revenue and adjusted EBITDA. I can confidently say we are in the strongest position we have ever been in as a company. On the financial side, we delivered all time record quarterly revenue of nearly $2,000,000,000 which is up 186 percent year over year. Non GAAP commission and other transaction related expenses as a Adjusted EBITDA for the quarter was a positive $71,000,000 And if you look at our Trailing 4 quarters, we generated $44,000,000 of adjusted EBITDA. In the second quarter, Our national market share almost doubled from the prior year as share increased to 6.2%, up from 3.3%, Primarily driven by our agents growing their transaction count and our increase in the Compass agent base. The strong housing market was certainly a tailwind, but we outperformed the industry by a wide margin. Year over year, Our transaction growth was 140% compared to industry transaction growth of 32%. A year earlier than we previously expected. We are particularly excited that this Financial success was driven by Compass making agents more productive on the platform. On average, each of our principal agents closed 6 point of 32%. The combination of our agents' outperformance on the number of transactions completed and the 19% increase in home prices Drove GTV to a record $77,000,000,000 in the quarter, up 186% year over year. GTV for principal agent was $7,200,000 up 130% year over year. Our agents recorded over 65,000 transactions on the Compass platform in the 2nd quarter and we beat our prior record By over 18,000 transactions, our agents make up roughly 1.5% of real estate agents in the U. S. Represents over 6% of the industry's market share. This quarter, our principal agent count increased to over 10,006 with retention rates that continue to lead the industry and above 90%. I am pleased to say that our principal agent retention in Q2 2021 was higher than the prior quarter and higher than the prior year. This is particularly important to us as retention is the primary indicator of the value our customers feel they are getting from our platform. We are well positioned in the upper end of the market where price increases have outpaced the broader market and we will continue to expand our footprint into upper and mid tier markets throughout the course of the year. We launched 15 new markets in 2Q including Indianapolis, Charlotte and Minneapolis, bringing our total market count to 62, covering approximately 45% Let's move to our platform and how it powers our sustainable financial advantage relative to incumbents. I know that many of you see us And I am proud that our team has made us the fastest growing brokerage in the United States. But our strategy at Compass is to be much more than a brokerage. Over time, you will see how our platform powers a larger number of adjacent services with an above industry average attach creating a long term sustainable financial advantage for Compass relative to others in the industry. The size and nature of this opportunity is made possible Because of our unique approach to creating the 1st end to end integrated technology platform for real estate agents, No traditional brokerage firms are making the necessary technology investments to empower their agents to service the entirety of their client needs and facilitate the entirety of the transaction end to end in one platform the way Compass has invested in over the past 7 years. With a product and engineering team consisting of more than 1,000 people, Compass has a technology team that is by far larger than any traditional broker firm. Given our success to date, by next summer, we expect to be the 1st company to provide agents with a platform that will allow them to facilitate the full transaction in one place without having to pay for or log on to any 3rd party real estate software. From first client contact to property marketing for sellers In property search for buyers to CRM to offer management to transaction management and closing, the full transaction process will be connected to an integrated experience built on a single code base across both mobile and web. Unlike Compass, the technology offering the traditional brokerages include a collection of disconnected third party tools that don't speak to each other And that prevents them from fully integrating value added adjacent services in the natural workflow of the transaction. Compass' approach to building an integrated platform gives the company a competitive advantage in easily connecting more value added services over time Into the transaction experience. We already have multiple adjacent services to attach the transaction running through our platform, So the traditional services like title and escrow and in Q2 we announced our mortgage JV with guaranteed rate. In addition to more traditional adjacent services like home insurance, home warranty, home security and move in services, we also see a Clear path to facilitating and monetizing dozens of additional adjacent services that are uniquely enabled by our platform, Including property marketing spend, agent business spend and client spend, positioning Compass to have a share Call. Digital ads, property videos, 3 d renderings, real estate sign production, open house brochures, Listing photography, client 15 programs for past buyers and sellers are just some of the many examples of these type of opportunities where third parties are seeking access to our agents. Currently, agents spend 1,000,000,000 of dollars on these types of services and we can make them easier to access, more convenient and more cost effective for agents and their clients by having everything centralized in one location through the Compass platform. With the incremental TAM provided by the addition of these value added services, Compass' potential revenue per transaction We'll be multiples above the industry average, creating a sustainable financial advantage relative to incumbents. As I mentioned, last month we announced Origin Point, our mortgage JV with guaranteed rates. We are excited to bring our best in class agents, High quality transaction funnel and technological expertise to Origin Point. Our goal is to be in business in multiple states Industry averages of eligible transactions in 3 to 5 years with profitability for the JV on an adjusted EBITDA basis expected in 2022. Turning to the housing market, we believe there are incredibly strong fundamentals and we see continued strength in the future. This is not just an after effect of the pandemic. Consumer demand among homebuyers remains high, While interest rates remain near historic lows, yes, 7,500,000 Americans have already moved, but 1,000,000 more Continued expectations of hybrid work environments will continue to spur demand where people are using their homes more than ever before Moreover, millennials are entering their home buying years, which will further sustain demand and COVID has resulted in significant pent up demand from the international buyer. In many of our key markets like Florida and New York and California, buyers from places like Canada, Latin America, Asia and Europe have been unable to travel to the U. S. For over a year now and that demand from those buyers All this needs us to be optimistic in our outlook for the residential housing market this year and next. That said, the more lasting impact COVID may be from COVID may be on the acceleration in digital adoption, which looks like a permanent shift. And we've seen it play out across many industries including media streaming, food delivery and of course real estate. Customers want the same high level of service, The more digital interaction better suited to their lifestyle. In real estate, the winners will be the agents who can best utilize technology to transform the client conference and the brokerage firms that can best help agents to utilize technology. This has been Compassus' focus since our inception. The Compass platform, which is unique in the industry, is the result of more than 7 years of engineering work and more than $600,000,000 and Investments, all in the support of being the company that best helps agents use technology to realize their entrepreneurial potential. Over the last 10 years, technology has continued to empower agents to serve more clients And where we continue to lead the industry. This can be seen in the transactions per average principal agent, which increased from 10 in 2018 To 13 in 2019 to 17 in 2022 and with 1H 2021 over 1H 2022 Reflecting a further increase of 60 3%. With digital adoption in real estate still in its relative infancy, I've never felt more confident that Compass is the best positioned company in our industry to help agents use technology into a new software to continually increase the number and quality of transactions they can complete each year for clients, making Compass the best place for agents to grow their business. I am now going to hand it over to Kristen, Who's going to go through the financials in more detail. But I just want to say once again how pleased I am with the performance this quarter and how thankful I am to the 25,000 people at Compass that have worked so hard to create such incredible results. With that, let me turn the floor over to Kristin And I'll be back at the end to answer Q and A. Thanks, Robert. I'm excited to be here today to share our second quarter results. I'm also going to go a bit deeper into Compass' path to adjusted EBITDA profitability and provide some updated guidance for the remainder of the year. Before we dive in, I want to start by reiterating how outstanding our Q2 year over year results were across the board. Revenue grew 186%. Transactions grew 140% and that's compared to the industry average of 32%. We nearly doubled our national market share to 6.2%. We generated $71,000,000 of adjusted EBITDA, An improvement of $128,000,000 year over year. Our average principal agents grew 25%. We launched 15 new markets. We generated $81,000,000 of free cash flow and we have over $800,000,000 of cash and an untapped $350,000,000 revolver, so our balance sheet is healthy. The strength, breadth and persistence of these results showed momentum that exceeded our expectations, coming in well ahead of our financial guidance on both revenue and adjusted EBITDA. Our extraordinary agents, armed with our tech platform, delivered outsized results on both the top and bottom lines. And these results truly were outsized. Revenue in the quarter was a record coming in at $1,950,000,000 More than $700,000,000 better than our next best quarter. Adjusted EBITDA was a positive $71,000,000 bringing us to adjusted EBITDA profitability of $44,000,000 over the last 12 months. And we closed 65,000 transactions in the quarter, which equates to over 700 transactions per day. We expect continued strength in our business, but the comps will get harder now that we have lapsed Q2 2020, the quarter most negatively impacted by COVID. We saw 82% revenue growth in the back half of twenty twenty compared to the prior year, but we see a lot of underlying strength in the residential real estate market that we believe will persist through the remainder of 2021 beyond. Continued strong demand Simply cannot be met by the current low supply, pointing to continued strength in the housing market for several quarters. Adjusted EBITDA in the Q2 than anticipated as revenues came in stronger than expected, while we continue to operate the business at a lower expense base following COVID. The combination of elevated growth and structural profitability that we saw in Q2 has accelerated our timeline to adjusted EBITDA profitability sooner than previously communicated. We originally expected to achieve sustainable profitability in 2023. Given our strong quarter and our revised outlook, we now expect to be profitable on an adjusted EBITDA basis for the full year 2022. We're happy to report a significant improvement in our full year 2021 guidance. On our last earnings call, we provided annual guidance of $5,350,000,000 to $5,500,000,000 in revenue. We now expect revenue of $6,150,000,000 to $6,350,000,000 A year over year growth rate of 68% at the midpoint compared to a growth rate of 46% in our prior guidance. This reflects an increase of $800,000,000 to our revenue guidance. Our prior adjusted EBITDA guidance was a loss of $225,000,000 to $245,000,000 We now expect a loss of $45,000,000 to $85,000,000 and adjusted EBITDA margin of negative 1% at the midpoint. This reflects an improvement of $170,000,000 compared to prior guidance and a $90,000,000 improvement compared to our loss of $156,000,000 for full year 2020. For the 3rd year, we expect for the Q3 rather, we expect revenue of $1,650,000,000 to $1,750,000,000 At the midpoint, this implies year over year growth of 43%. We've seen healthy activity in our markets in July August so far. For the Q3, we expect adjusted EBITDA to be breakeven to a loss of $20,000,000 The $1,950,000,000 of revenue we generated in the 2nd quarter was strong. Keep in mind that the 186 comp. The first thing growth rate we saw was magnified by the weak prior year comparison due to COVID. To normalize for the unusual seasonality we saw in 2020, We looked at the 2 year CAGR from 2019 to 2021. In Q2, this 2 year CAGR was 65% And we expect a similar trend for revenue growth in Q3 and Q4. These 2 year takers reflect continued year over year growth in our core business and early traction in Adjacent Services. We expect to generate more revenue in the second half of the year than we did in the first half. Our visibility into Q2 outperformance combined with our strong future outlook has given us the confidence to make investments in our business to drive long term profitability. We opted to launch 15 new markets in Q2 versus our typical pace of 2 markets per quarter, Flowing our market count from 47 to 62 just in the last quarter reflects an increase of 30% And there is cost associated with that in the back half of the year. We are also investing to expand title and escrow to cover 7 states by year end And we made the decision to launch our mortgage business a year sooner than planned. These investments in Adjacent Services will drive And we continue to invest in our tech platform, which is what drives Compass' outperformance relative to the industry. Prior SEC investment made it possible to nearly double our market share year over year to 6.2% this quarter as an example. These three investments, launching new markets, expanding high margin adjacent services And building new proprietary technology to drive outperformance by our agents will drive sustainable long term profitability. There are three reasons I have the confidence that we can achieve sustainable positive adjusted EBITDA in 2022. First, our ability to scale the business is most dependent on how successful we are at recruiting agents, retaining agents and growing their transactions and we have done this consistently. 2nd, we are successfully growing our high margin adjacent services business, Including our mortgage JV, growth in adjacent services should steepen the curve and adjusted EBITDA per transaction as our transaction count continues to grow. 3rd, we see a clear path to profitability in the markets we serve based on the demonstrated success that we have seen in scaling market share and driving profitability as our markets mature. As detailed in our shareholder letter, our expansion markets launched in 2018 scaled to double digit market share and reached Positive market level margin within 3 years of launch. The 7 MLS markets Compass launched in 2018 that has been operational for a full 3 years were unprofitable in their 1st and second years. But by the 3rd year, Those 7 markets had on average 11% market share and a positive market level margin of 4%, which we expect to continue to The operating performance of our markets has been remarkably consistent with these same trends having been proven across Various sized markets in different geographies across price points and across local market norms. We've launched a number of markets since then with roughly half of our markets still in the investment phase. Early indications show these markets are off to a call. Strong start performing in line with our expectations. The combination of our ability to consistently grow our agent base and their transactions To scale our Adjacent Services business and to drive market level profitability and share provides us with the confidence that we can deliver on this commitment to sustainable profitability in 2022. All in, this is another Fantastic quarter for Compass. We achieved our best ever financial and operational results. We dramatically raised guidance for the full year 2021 and we now expect to achieve sustainable adjusted EBITDA profitability in 2022. Most importantly, thanks to our team of agents and employees for all the hard work that made these amazing results Conference Call. Now with that, we are happy to take your questions. Operator, first question please. Your first question comes from the line of Brian Nowak with Morgan Stanley. Hi. This is Alex Wong on for Brian. Thanks so much for taking the question. First one just on number of principal agents added. Can you maybe help parse out what was leading that in terms of either new markets versus existing markets? And Robert, you talked about the 6 Kristen, I think the new EBITDA guidance assumes a roughly 20% drop through on the incremental revenue and the pull forward by year. Can you maybe parse out of the 3 areas you're talking about, which ones are sort of maybe Pushing that more in terms of ancillary services, new tech and new markets. Thank you. Great. So how about I'll start with highlighting the driver of that 6 point two number and then I'll pass off to Kristen. Look, we've seen very consistently not just this quarter and this past the Prior quarter, our agents outperforming the market. This quarter, it was 93% growth in transactions for an average principal agent versus the industry going at 32%. But it's been consistent over many years. And so The number of transactions per year increased per agent from 2018, 2019, 2019 To 2020 and then further in 2021. And it all gets back to that 19% number that we've talked about in the past, Where the average agent at Compass across 5 years of cohort data across geographies is growing their business 19% between year 1, year 2 and then further on conference. In subsequent years and that's what you're seeing now is the impact of that at scale. And when you have a company of Now over 1,000 person technology team all focused on the goal of helping agents grow their business and a larger company on top of that comp. We're all here to help agents grow their business and have a better quality of life, more money to support their family, more time to be with their family. These are the results we got and are bringing people across many, many different industries to bring their unique talent and their unique insights to that goal. And I'm happy to talk to your other two question. So in terms of the agent additions that we saw in Q2, as we mentioned, we launched 15 new markets in Q2 at different points throughout the quarter. So our expansion team is working throughout the quarter to launch those markets and generally you see announcements as we launch those markets. In any quarter where we have New markets that we're launching. We do have our sales teams focused on ensuring that we're bringing new additions in those markets, but We have sales people across all of our markets who are recruiting new agents into the base. So I would say, as you look at those new It's really split between our new markets and our existing markets and we haven't seen anything Unusual or any different anything different in terms of our ability to recruit agents in either the new markets or the existing markets. In terms of your last question, as we look at the increase in spend in the back half of the year, Yes, there were really three areas that I highlighted. And the first is expansion. And those 15 markets that we launched in Q2 and the 3 markets that we launched in Q1, Those really are driving about a third of the incremental spend in the back half of the year. The tech investment is driving another third And then the remaining 3rd is mostly related to Adjacent Services, although there are a few other small items in there as well. Great. Thanks. Your next question comes from the line of Mike Ng with Goldman Sachs. Hey, good afternoon. Thank you very much for the question. It was really helpful to see the market level margins over time for the 2018 launches. Would you talk a little bit about the key drivers of that margin improvement and and how those leverage over time. Is it primarily C and O expenses or adjacent services attached that drives that margin for instance? Any detail They will be incredibly helpful. Thank you. Sure. Well, glad you enjoyed the new disclosure. For a major market and these are really new markets where we don't already have a presence. As I talked about, it generally takes 3 years from launch to get to double digit market share and profitability at the market level. And in the first and second year of a market launch, we're focused on adding agents and building out our operations. We generally have to invest ahead of the revenue in those major markets. And we typically cross over to profitability in the 3rd year As you both, a strong agent and transaction base from which we can expand further. As you look What's really driving that, it is leverage across literally all cost categories. And the specific data that we showed was markets that were launched in 2018. At various points within 2018, There was little to no adjacent services reflected in the numbers that you saw. So that is all opportunity to come. Great. Thank you very much. Probably worth noting also roughly half of our markets are still in the investment phase And they're moving to profitability at some point within the next 3 years. So even within the markets that we have already launched, There's a lot of opportunity for additional growth and profitability. Great. Thanks, Kristen. Your next question comes from the line of Jason Helfstein with Compenheimer. All of, I guess, the key metrics work in the right direction. Maybe help us understand just a little more So on agent productivity, obviously this was I think a peak that's 6.1, 6.12. How should we think about that going forward? Can And transaction as a percent of revenue, maybe explain kind of on a year over year basis kind of why that was down? And then You also saw a very nice gain in marketing efficiency. Maybe just talk about that a little bit more. Thanks. And maybe I'll talk about the agent productivity and pass it on to Kristen to talk about the other two items. Yes. Look, we there may be fluctuations in agent productivity quarter to quarter, but we're very confident that the trend line of agent productivity 13 in 2019 and 2020 it was 17. So we feel very confident in that ongoing number going Up into the right. And again, that's just because We have clear insight into the productivity tools that we're building for agents. We're making sure that anything that can help an agent grow their business The Compass over time will be able to provide if not today and then definitely over time. And we are constantly looking at everything out there that is And Jason, I'm happy to talk through your question on commissions and other. So we did see commissions And other as a percentage of revenue improved 100 basis points year over year. And we Saw a similar trend in Q1 where we saw an 80 basis point improvement year over year. So we did even better than that this quarter. And this is primarily the result of three things. 1st, improving agent economics as our cohorts mature, The recovery of New York City post COVID, which we think will continue as international buyers reenter the market as Robert mentioned in his comments. And then we have been focusing our expansion in markets where the margin structure is more attractive to Compass. And so as we prioritize those markets for expansion. You're really starting to see the benefit of that roll through the financials. When it comes as far as the leverage we In the sales and marketing line, first of all, I mean, we were thrilled to see operating leverage across all Categories, we touched on submissions and other, but we saw it down the entire P and L. About 6.80 basis Points came from sales and marketing and that was really related to economies to scale given some Offset by costs associated with a greater number of average principal agents and some price increases. We do have occupancy in that line call. And so that is one big chunk along with a couple of other things that are essentially fixed costs in that category. And so that's what drove the outsized Operating leverage in that line. Thank you. Your Our next question comes from the line of Ross Sandler with Barclays. Hey, guys. Just a follow-up On that market disclosure data and then one other new question. So the data looks great and is the breakeven point Happening sooner today than it was maybe in your first dozen or so markets because of the role that adjacencies or Compass Anywhere is playing and flipping those markets to EBITDA positive. Any color on like that's obviously new over the last couple of years compared to back in the day. So can you get to breakeven a lot quicker on these new markets, I guess another question? And then just a high level question. So you're seeing some softening in the market, not as much at the high end where you guys operate, but just kind of across the board. Is the value prop for agents moving to Compass higher or The same if we're in a softening market versus the strong one that we've seen. Any color on your ability to recruit agents from other platforms when All right, Raj. Well, good to hear from you. In terms of the Market level profitability, we have we've just gotten better at launching these markets over time. The 2018 cohort is one that really reflects Sort of our newest expansion playbook, but we have continued to evolve it since then. We are we did see an improvement when it came to those 2018 cohorts in terms of the timeline to profitability relative to the markets that we launched before 2018. And that's coming from a whole host of things. Compass Anywhere plays a role in that essentially that creates incremental capacity in the market that doesn't require associated office space. So That's certainly a factor there. Adjacent services really does not impact those numbers. We are so new in adjacent services that most of the opportunity from a profitability perspective on a market level is to come. So as we continue to roll out title and escrow and mortgage across all of our markets and we've got a pretty healthy expansion plan for title and escrow. By By the end of this year, of course, we want to have mortgage operational across all of our markets by 2022. That will be another catalyst for reaching profitability potentially even quicker. And on your second question about what happens to Compass if the housing market cools, I think it's what we're seeing that we have again a very positive comp. But if the market does cool, we have built a business that has performed very successfully throughout many different market environments, Particularly when you look at it at a local level and we have a very large buffer of growth on top of the market because our transactions have consistently You have outgrown and outperformed the market with our transaction growth this past quarter at 140% versus the industry at 32%. So even if there It is flat or decline in the market, we will still have a significant buffer to also grow aggressively. That said, there are 2 unanticipated consequences of a slowing market which helped Compass. The one is it makes it easier to talk to agents. When things are really, really busy, agents don't have enough time in the day and they're focused I'm just meeting their client needs and after that their family, not having conversations with new companies. But when things slow down, they have more time to talk to our enterprise sales team. The second is when their business goes down or slows, they're looking for growth And Compass is the answer for that. While a lot of brokerage firms are focused on charging less And how to split the pie in different kinds of ways, we are uniquely focused on how to create more value We're the best answer for growth. Stadium. Thank you. Good evening. Congrats on the quarter. Kristen, I think you touched on this a little bit And this is also a previous question, but could you maybe for the 3Q guide and the full year guide, could you provide a little bit more clarity or granularity in terms of the Underlying drivers, your expectations on the average principal agents growth, the productivity going forward, And also any commentary around commission rates, will they be resilient around these levels or do you expect any sort of fluctuation over the back half of the year looking better than your guidance? Sure. Well, we were needless to say, very pleased with our revenue growth in Q2, up 186%. We provided guidance of $1,650,000,000 to $1,750,000,000 for Q3, reflecting continued strength in the real estate market and we expect to generate more revenue in the second half of the year than we did in the first half of the year. In the second half, we expect that price will grow year over year, but at a lower rate than it did in Q2. And this is good actually because lower prices will bring back buyers into the market. Some buyers dropped out of the market in Q2 for fear of overpaying just given where prices were going. Transactions, we also expect will continue to grow year over year, Partially as a result of the better pricing trends I talked about, but also as a result of the losing of supply in the market. When it comes to the commission rates, we don't That's any significant changes there. We expect for that for the commission rates to remain in line with levels that we've seen over the last several quarters actually pretty steady. And as we are thinking through the business, we really are most focused on transactions. So the more transactions on our platform, the more opportunities we have to attach adjacent services. That's helpful color. And then just as a quick follow-up on the OpEx line. Where do you see the most sort of leverage in the model, not only And the back half of this year to sort of hit your targets, but really as you mentioned the 'twenty two profitability targets on the OpEx side, where do you see the most comp. Sure. The place where we see Probably the most leverage is in the commissions and other line And we will see it really across all of the other expense categories. We won't go into a lot of detail today on that. That's going in a level deeper in terms of 2022 guidance. But that's how I would think about it. Got it. Thank you so much. Your next question comes from the line of Akash Agarwal with UBS. Hi. So thank you so much for the question. I was wondering if you guys could talk more about the puts and takes with rolling out and getting to profitability in Conference. And then if you guys could give any more color on the economics within the JV as well, that would be super helpful. Thank you. Well, look, we are really excited about mortgage. It's a big opportunity for us. It's a $50,000,000,000 TAM and it's also a mortgage is a natural extension of our core business. We announced the JV with Guaranteed Rate about a month ago. Guaranteed Rate is an experienced partner for us with operational expertise and our view is that it really de risked our ability to get to market here. Quickly to grow this business and ultimately to be successful there. As we look ahead, we That's to be able to drive attach rates for mortgage at levels in line with the industry. And we think we should be we could even do better than that as a result of being able to integrate the offering directly into our platform. Of course, the most important element there is to have a compelling offering, one that our agents are Proud to recommend to their clients and so we're really focused on that right now. In addition, as we're getting the operations for the JV set up, we are Working to get the warehouse line set up, we are pursuing various regulatory approvals and we hope to originate our 1st mortgage before the end of the year and hope to cover all of our markets with a mortgage offering by the end of 2022. Ultimately mortgage has a lot of potential financially, but Within 2021, it's going to be, I think, a very small contributor to revenue, but one with a lot of long term potential. Yes, sir. Your last question comes from the line of Matthew Gagioso with Compass Point. Expanding to maybe some beyond the traditional mortgage title escrow, just wondering how Compass' platform might provide an opportunity to capture those services I think Robert may have been disconnected unfortunately. I think the operator is calling him back. Jim, he is calling for technical difficulties. Yes, We do have him reconnecting. If he'll just hold just one moment, I apologize. Thank you. Hello. And Robert has rejoined. Matt, perhaps you can ask your question again if you don't mind. Yes, no problem. This is the first for me, but hi Robert. Just two quick questions. You mentioned having that end to end platform in place next summer. I was just wondering what pieces are remaining to develop there? And then on the adjacent services beyond the traditional mortgage title escrow, just wondering how Compass' platform might provide an Opportunity to capture those services that traditional brokerages might not be able to. And thanks for rejoining the call, Robert. Yes, absolutely. So let me start by sharing some of the key components. One, there's listing search that's good enough that agents don't have to look at multiple websites and that's both on data quality as well as functionality. There's 2 third party transaction management software that's including the forms, e signatures, disclosures. There's 3rd party marketing tools, think about content creation, digital ads, digital newsletters, organic social posts, Creating the sign creation, so all that stuff has to get created somewhere and being created through our platform, not All that exists today and then CRM as well as market accords. The key areas of opportunity are to continue the transaction management with forms, e signatures. That's one of the reasons why we acquired Glide, which is a transaction management, Yes, a software company based out of California. And then on some collaborative functionality For CRM, this decade is Going to be defined by collaborative workflow and hybrid work environment requires it. By the way, what we're doing right now is example of hybrid workflow And of course, Zoom, Google Meet, etcetera. Now when you look at professions out there, who is the most collaborative profession? It's really the agents. The agent to get a transaction done has to coordinate with a 3rd with a designer, with an assistant on their team, with a transaction coordinator, With a photographer, with a home appraiser, home inspector, with a loan officer, title officer. And so the investment in collaborative sharing permissioning functionality Throughout every aspect of the platform is a key area of investment and opportunity. In terms of the advantage that we get For attach and adjacent services, both the traditional ones, but also the ones that traditional companies Can't realize. The way I would describe it is, at Compass, the platform is like a spine. The spine has 33 vertebrae. Let's say our product, our platform has 33 different products. And on the spinal cord, what goes through that spinal cord is the transaction. One of the challenges of a traditional brokerage firm, let's say they have 2 or 3 of the vertebrae are Their own, but the other, the transaction management software is a 3rd party. The listing search It may not be happening on their platform. The marketing of digital ads not on their platform through a third party, on and on and on. The problem is Then the brokerage firm doesn't know when the key events happen to help Facilitate the transaction, recommend the right value added service and get compensated accordingly. So here's an example. Yes. The average brokerage firm would not know when the agents listing is created Instantly, instantly with agentless you created and wouldn't be able to say last time you create a listing, you create a digital ad. Would you like with this one click to create a digital ad here? Because none of that is staged in the platform. And then on the title side, When the listing goes into contract, there that same type of history And engagement isn't saved there as well. And so that's a way to try to describe why it's so critical To have every interaction with the transaction and the client happen in one platform, because it's the only way to be able to help facilitate it At the right point where it matters and create the right simplicity and one click option to make it easy for the agent and ultimately their client. Okay, great. Thank you everyone for joining us for the Q2 call and please reach out if we can be of any assistance in the future. Thank you. Ladies and gentlemen, this concludes today's conference call.