Q1 2021 Compass Inc Earnings Call
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Good day and welcome to the copies of first quarter 2021 earnings Conference call. My name is Sydney dry 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 on first function.
Been berrett, Vice President of Investor Relations for context, you may begin your conference.
Good afternoon, and thank you to everyone for joining the conferences first ever earnings call today per view of actual financials will address the continuing operations of compass and certain items are presented on on non-GAAP basis. The reconciliation between GAAP and non-GAAP measures for both of our Q1.
Finding April as well as our guidance are included at the back of the earnings release of shareholder letter. Please.
Please also see our disclosure on forward looking statements, which reflect compass as current view of future financial performance, which may be materially different from our actual performance for reasons that we cite in our form 10-Q and other SEC filings.
<unk> uncertainty posed by the COVID-19 pandemic and the difficulty in predicting its feature of course, an impact on the housing market and the global economy joining.
Joining us today will be Robert Rapkin Compass, as founder Chairman and Chief Executive Officer, and Kristin anchor brand count as the Chief Financial Officer, Robert will provide a brief introduction of the compass and discussion of our strategy and then Christian will cover the financial results and outlook in more detail with that.
I would like to turn the call over to Robert.
Yeah.
Thank you Ben and thanks to everyone for joining the call. We're excited to be here today to share more about compass and our outstanding first quarter results.
First I wanted to provide some context on the housing market overall.
Overall, the housing market is strong today, and we expect it to remain strong for some time.
Tumor demand among homebuyers remain high while interest rates remain at historic lows.
After the experience of the last year, everyone wants more space that is better suited to their needs.
People are looking for more indoor space more outdoor space more home office space and the desire for second homes has never been stronger.
In addition, more people are looking to buy as millennials are just now entering their home buying years.
This has created a permanent shift in the demand curve that will take years to meet at the same time COVID-19 has accelerated trends towards digital adoption that we had previously thought would take a decades of play out.
<unk> is an opportunity for technology powered real estate agents to distinguish themselves and win share in this high demand environment.
In the midst of these long term fundamental shifts we are focused on providing our nearly 21000 agents with the tools they need to deliver best in class service to their clients.
Our first quarter results were strong both in terms of revenue and adjusted EBITDA revenue was $1 $1 billion.
Of 80% from the prior year and adjusted EBITDA improved by 70%. We grew our principal agent count by 20% compared to last year and we now have nearly 10000 principal agents operating their businesses on compass.
These agents closed over 40000 transactions in the first quarter of.
The 67% from last year.
This was the best first quarter for transactions in our history, and our third largest quarter ever.
These agents closed nearly 44 billion in gross transaction value of 75% and another record for our first quarter.
And we see this momentum continuing into the second quarter.
Our platform is driving these outsized results and helped our agents to grow their business. This can be seen in our results as we grew faster than the market while the real estate market grew transactions just 14% in Q1 year over year, we grew our transaction per principal agent by 30.
9% with our total transactions growing 67% and this is supported by our increased platform usage the ratio of daily active users to weekly active users was 69% up seven percentage points from the prior year period.
In total sessions were also up 120%.
Compass provides an end to end platform that empowers agents to deliver exceptional outcomes for their clients.
It is an integrated suite of cloud based software for CRM.
Marketing client communications and other critical functionality all custom built for the real estate industry. It also use the proprietary data and analytics to deliver high value recommendations on outcomes for compass agents.
Agents are essential to the real estate transaction, but they have never had a seamless fully integrated end to end technology platform to help them serve more clients grow their business and the time the average agent logged into the 13 different systems every day to do their job and the average number of.
Engineers employed by traditional brokerage firms is zero, even though this is one of the largest asset classes in the world.
By combining the platform with our agents we are seeing some amazing results.
A 19% increase in transaction growth in year, two compared to year, one for our agents and home selling quicker with 21% fewer days on market versus the peers.
These results drive agent satisfaction with industry, leading agent retention rate of over 90%.
We operate in 47 markets in the U S. In Q1, we launched three new major markets and expanded into new cities within our existing markets.
Submarkets, which are extensions of our existing markets allow us to expand efficiently by leveraging our existing infrastructure and agent network.
Our share of the U S market is only 5%. So we have plenty of runway left to grow in our three largest MLS markets.
We have operated the longest we of 26% share.
So we know how to grow share and we are confident that we can continue to grow share cost efficiently by simply replicating our expansion playbook, including through our compass anywhere program.
Our 850, plus person product and engineering team is constantly introducing new and updated products and features that drive agent productivity and efficiency.
For example in Q1, we launched business tracker, which allows agents to visualize the entire pipeline lead buyers sellers renters landlords all from one place prior to the business tracker most agents manage their pipeline on a piece of paper or on a whiteboard, but now can.
Do it within the platform. They can now view details by each transaction from Linkedin to contract to close.
This phase agents' time and reduces the reliance on staff or other third party software.
Another Great example.
He is our AI powered likely to sell of recommendation engine, which predicts which properties are most likely to sell.
It incorporate data light property details pricing history and mortgage status.
To rate how likely of property is to sell in the next 12 months.
Agents are then alerted to reach out to these contact helping them to win the lifting before competing agents, even though the property is in play.
Likely to sell recommendations result in a 61% higher win rate for agents comparing to the properties, we do not like to sell we nonrenewed likely to zone.
Our platform is proprietary and built announce but we look for opportunities to accelerate our product roadmap. When there is an opportunity to acquire of technology the agents love.
The acquisition of glide, which closed last week is of Great example, glue.
<unk> is a fast growing software services platform that provides compass and non compass agents with critical transaction management tools, such as offer and transaction management.
Digitization of Q forms E.
The signature.
And digital disclosures.
Slide of used by tens of thousands of real estate agents in California, and we plan to expand its reach both within and outside of compass to more states across the country.
We also made progress in expanding our adjacent services business on.
Our extensive network of top performing agents and their transactions create an opportunity to capture more spend in the real estate ecosystem adjacent to the transaction today, we offer services entitled on escrow and digital marketing and we plan to provide mortgage and other adjacent services in the future.
In February we acquired KBS title of <unk>.
Leading title company, serving the Washington DC area.
Compass as clothing services portfolio now operate in California, Florida.
Washington State, Maryland, Virginia, and Washington D C.
We plan to continue to scale, our title and escrow business in existing geographies and new markets going forward.
The first quarter of 2021 provide a strong start to our journey as a public company. The market is growing but our revenue transaction volume and <unk> are all growing much faster.
Every day more agents are joining compass and using our platform to grow their business and improve the real estate experience for their buyers and sellers.
And for those that are skeptical about the future role of the agent.
Agents are not going away in fact people are using them more over time not less.
According to the National Association of Realtors, 89% of home sellers and 88% of homebuyers using agents.
Contrary to what some may of assumed those rates of actually increased over time.
<unk> from 83% in 2010, and even less of that in 2000.
At Compass, our strategy is to replace today's overly complex paper driven antiquated workflow with the seamless all digital end to end platform that empowers every real estate agent to provide exceptional experiences to their buyers and sellers.
This will take time and continued investment, but the opportunity is enormous and compass is approaching the problem from a different angle than any other player.
The empowering agents with a proprietary end to end platform that drives growth in their business.
Real estate agents are Ceos of their businesses positioned at the center of a complex multi party transaction and.
And agents serve as the liaison between the client the counterparty and many other stakeholders from T pre sales to post close.
As we continue to expand our platform to serve the real estate industry, we will continue to.
Get closer to our vision of modernizing and our cake industry for the benefit of everyone agents clients and shareholders now.
Now with that.
I will now turn the call over to Kristin to walk you through the details of our first quarter.
Christian takeaway.
Thanks, Robert we met a lot of you on the virtual relevant over the past the mine and we look forward to reconnecting.
Q1, with the busy quarter frac, culminating with our IPO on April 1st.
But we've kept our eye on the ball operationally and delivered a record first quarter.
We grew significantly faster than the industry, while improving profitability.
The unique platform and vision helped us attract top agents in new and existing market. The can turn drive transaction volume market share gains and strong revenue growth.
Three things really stand out to me as highlights this quarter. The first is the revenue growth we showed at scale.
The second is our EBITDA improvement per dwelling.
On the SaaS on the top line, but also showing improving margins and the commitment to financial discipline.
And third the ongoing momentum in our business as reflected in the guidance that we will provide today.
Let's start with the top line revenue was $1 $1 billion in the first quarter up 80% compared to the prior year.
Net growth leads to identify key factors.
Those transactions from the 67% narrow hurting air transactions per principal agent growth, 39%. This measure of captured the Philips market strength and the power of our platform to unlock additional transactions and revenue for our existing agents.
Also we grew our principal agent base by 20% as we grow our agent base, our ability to increase transactions per principal agent paired with our industry, leading retention rates of over 90%, creating compelling agent lifetime value.
This quarter, we saw notable strength in Florida, California, and the New York region, including early signs on the strong recovery in New York City. Prior of revenue was up 89% in March year over year.
Finally in adjacent fair to say COVID-19 delivered strong revenue growth Opex small base as we drive attach rates of our title and escrow in existing regions and expand into new on.
So really starting to see the power of the platform that helps us to attract and retain the aten spend making them more productive on.
Lots of more transactions and then layering on more revenue per transaction due to the addition of adjacent services I think it's remarkable.
<unk> speaks to the strength of the flywheel that underpins, our based assets and our competitive moat.
Net on the path to profitability.
Adjusted EBITDA in the quarter was negative $31 million on.
On improvement of $71 million year over year.
This improvement is even more clear on the margin basis that we saw.
On improvement of nearly 14 percentage points moving from a negative 16, 5% margin in the first quarter of 2000 2010 negative two 7% in the first quarter of 2021 the.
The improvement in adjusted EBITDA, and Kevin of Nice channel topline growth and a focus on cost management.
We saw improvements in operating leverage across all expense lines on the non-GAAP basis. This includes an 80 basis point in true <unk> and commissions and other related expense as a percentage of revenue. This was the second consecutive quarter by this metric improved and it highlights our ability to net.
Manage cost of geographic income mix.
We continued to reduce the cost required to support our agents on the platform and the first quarter of 2021, we saw a reduction in our per agent support costs of one of our 15% compared to the same period. The same period last year, we expect the additional improvements to the automation and <unk>.
<unk> to invest to further reduce the marginal cost of England as more agents join our platform.
We've refined our expansion playbook and a variety of new markets. This allows us to drive faster market share gains, which leads the market level profitability sooner.
Programs like Compass anywhere are key to driving efficient expansion.
This allows us to improve the overall agent economics, while reducing occupancy and support cost per agent.
And we continue on <unk>, our capital condition strengthen Q1 free cash flow improved $120 million versus the prior year.
We ended the quarter with over $750 million of cash when including our our net IPO proceeds.
In addition, our $350 million revolver is undrawn.
On the ample liquidity to execute our strategy and our top priority is to drive profitable growth through smart investments in our business.
Now, let me turn to the guidance, we expect 2021 to be a strong year from the residential housing market, but we also make stat for our agents to continue to capture more share.
In the second quarter, we expect revenue of one five to $1 6 billion.
And find growth of 127% at the midpoint.
We expect to see outside growth as the last the COVID-19 impact felt most acutely in the second quarter of 2020, we.
We expect second quarter, adjusted EBITDA of negative $10 million to positive $10 million at the midpoint. This implies that we won't be breakeven for the second quarter.
For full year 2021, we expect revenue of $535 billion to $555 billion.
At the midpoint this represents 46% year over year growth as.
This top line guidance reflects our ability to successfully grow our existing agents businesses bring new agents onto our platform on the strength of the housing market.
Finally, we expect our full year adjusted EBITDA to be in the range of negative 225 to negative $245 million or of negative four 3% margin at the midpoint.
This is roughly in line with our EBITDA margin in 2020.
Given the price momentum, we see a compelling opportunity to invest in future growth, while also ensuring our path to profitability and better the unit economics.
We plan to reinvest roughly half of the incremental profit back into the business in two areas first accelerating the expansion of adjacent services for our long term adjusted EBITDA margins are strong.
And second the investment in R&D with the.
Focus on automating internal workflows to reduce the marginal cost of acquiring and supporting our agents.
We expect these investments to drive our ability to scale profitably as the crowd provide meaningful value to our agents and their clients and substantially increase our Tam.
And we are well on our way to delivering on our vision for <unk> all of the digital end to end platform that empowers real estate agents to deliver an exceptional experience to their clients.
We have the vision the experience and the engineering talent, along with the capital and financial profile to enable us to continue to build upon our mission to transform the real estate.
In closing we had a phenomenal start to 2021, we're executing well from our leadership position gaining share and driving operating efficiencies all of our creating tremendous value for our agents and their clients and the broader residential real estate ecosystem.
With that well open the lion's share question.
This time of I'd like to remind everyone in order to ask a question price star Indianapolis of one on your telephone keypad, well pause for just the MA to control of the Q&A roster.
And your first question comes from avoid Wamsley with Deutsche Bank.
Thanks, guys. Two questions first can you help us understand the magnitude of adjacent services revenue in the quarter that we were just trying to kind of assume flattish commission rates year over year at $2 four 6% of GTP. It was implying something like just shy of $40 million.
Of the adjacent services revenue, which seemed pretty high the are we.
In the right ballpark here.
And if so can you let us know what's driving the strength there and then second on the kind of mortgages.
<unk> can you just talk about how you guys plan to go to market. There is that something you're building right now is that.
Something youll move into through acquisition to the partnership.
Give us a sense or how youre going to attack that and kind of where are you guys in preparing for that.
Sure.
Nice to talk to you here.
So I'll take the first question in terms of of adjacent services.
So our adjacent services business.
Through nicely in the first quarter.
Really glad to see that and of course its growth off of the small base, but we think we've got a huge runway ahead of us there.
As a reminder.
The overall market opportunity of our title and escrow is $35 billion. So we are spending some time and focus there.
We're not going to disclose an exact announcement turns out and true.
As of adjacent services revenue.
But we are very focused on continuing to deepen our presence in existing market and also looking for opportunity to expand to new markets.
I think the second part of your of your question on adjacent service day in place.
On sort of the implied commission rate and I think there are a couple of things that are included in our revenue that are not necessarily captured in the GTP and I think that's part of the year right adjacent services braking part of that GAAP.
When you do just sort of the a rough math on the on the commission rates. The other things are included in revenue that arent captured and GTE are rentals and referrals.
We did see a slight tick up in commission rates, but.
It was ever the slight uptick not something that we think is necessarily indicative of the longer term trend that hopefully that clarification is helpful.
And on the question around the mortgage and buy versus build we look at the.
On the buy buying versus building versus JV, and we are committed on a path towards the JV when balancing.
The year the quality of an outcome the speed of an outcome and the potential of the size of the outcome JV is where we where.
Where we think there will be the most opportunity.
Yes.
Alright. Thanks.
Thanks, guys.
Operator next question please.
And our next question comes from Jason <unk> with Oppenheimer.
Hey, Thanks for taking the questions. So to just let me start with Congress anywhere.
You said, 38% of agents, where comp is anywhere what was that last year on the first quarter.
And any plans to have any new markets. The comprised entirely of compass any of our agents and then secondly, I can't help back after the the open door call I think they highlighted how they.
We're in a position to start doing homes over a million I think they quoted doing our homework of $1 million.
In Los Angeles, and maybe that was of one off but to the extent that I buyers. If they are able to move up market, which most people were skeptical of how you think about that.
Relative to your business and you need to take more of the overall transaction into your system. Thank you.
Thank you for the questions how about I'll start with I buyer then.
I'll pass on the Christian to walk through kind of as it were.
In Q1.
In terms of of <unk>.
They were six months is putting context, there are 6 million transactions last year.
And I believe around 15000 of them, where I buyer and I believe this year is expected to be around 17000.
So I think the the actual impact on our industry hasnt been on.
<unk> been felt as much by our agents when I think about.
What concerns me.
In terms of competition I think about anything that an agent says is hurting their ability to do their business serve their clients.
Or someone that makes them want to we've kind of business goes somewhere else right. So.
We are not hearing from our.
21000, the agents that they are losing business in any meaningful way from from <unk>.
Now in terms of them moving.
In the spectrum of value of the home.
I think there are a couple of challenges with that one is more capital intensive.
And on top of an already very capital intensive business.
Two is as you move of price points that that type of clientele is more accustom.
Using an advisor and paying for advisory services.
And then lastly, the homes are more differentiated.
And it becomes harder to Algorithmically say, what the value of the home should be.
But with that I'll pass on the Christian to walk through kind of anywhere.
Sure. Thanks, Robert So in terms of in terms of compass anywhere, 38%, you're correct, 38% of the agents who joined in Q1 of our combat anywhere agents compass any of our agents made up about 30% of that total base of the <unk> than in 2020.
And we did see.
The slightly higher percentage of.
<unk> agents, who joined in 2020, where contact anywhere agents and the thing that makes the first quarter of 2021, a little bit different from 2020, it's just that number of new markets that we've launched and as we as we've talked about before when we launch a new market in the at least start off.
<unk> really recruiting.
Top producing agents.
And those tend to be the turns less often any contact any of our agents. So I think that sort of explains the differential in next quarter to quarter. I think your second question lot of time, whether or not we would look to launch compass anywhere only market.
And as we look across all of the market opportunity that we have in the U S.
We have a plan to be in every market in the U S. But our strategy may shift market to market I think there's a possibility at some point in the future that we made love tail left we may look to launch compass anywhere on the market, but that's not in the in the current plan.
Yes.
Thank you.
Your next question comes from Brian Tobin with Needham.
Thank you good evening of congrats on the quarter and the recent IPO.
I wanted to.
Kristen with the could you talk about what's embedded in your guidance around the agent adds the.
The number of transactions can be average transaction value.
From a modeling perspective that would be helpful.
Yes, so I'm happy to talk to that in terms of in terms of total in terms of the total transactions.
We expect for part of that number or you can tell by by the way that we're guiding for.
For the second quarter that we expect for transactions kiln <unk>.
The increase in order to support at the RSP had sales.
The 4% increase in terms of.
In terms of price in terms of average transaction value in the first quarter. I think you should expect to see that go up as well.
And we do also expect that the continued strength in that transaction per principal intent.
Metric as.
As well.
And it's been really great for US 50 of that in the midst of what is admittedly a very strong market our agents seem to be gaining share in the market and in Q2, we expect to net income yet.
Okay. That's helpful. And then I wanted to go back to the adjacent services of how are you thinking about the roadmap for adding additional services should we expect more M&A or is that going to be more of an organic initiative and then also if you could talk about the economics of the attach rates of the adjacent services over time, how we should be thinking about that as we look beyond the.
<unk> 2021 on longer term. Thank you.
Sure.
In terms of.
In terms of our title and escrow business.
We have been growing that business is sort of kicking of dual pronged approach we've been looking at growth both organically and we have done from from M&A.
To the extent of use M&A to grow that strategy, it's really about timing that really helps us to accelerate our ability to grow that business and keep in mind growth, we're getting as title and escrow officers.
On generally assets, where we already see strong attach with compass agents and then we just replicate the playbook that we have to drive attach higher over time as we look to expand the suite of services beyond title and escrow Robert talked about how how we are currently working through our strategy.
Around the around mortgage.
We're in active discussions around around that.
Really when it comes the acquisitions, its just about our pace of being able to.
The accelerate our progress into new areas.
We are targeting we have been looking at attach rates in the industry for title on excess specifically.
We see in the industry of tax rate of right around 40%.
In mortgage we see in the industry catch rates right around 20%.
And we think that's really that's a good target for us, but I am sure Keith talked of Robert I'll tell you. He thinks that's really a floor for what we can do there.
Yes, I think we are.
Of two advantages to.
To get above the average.
The attach rates the one agents into integration on the agent side real estate agents are the number one source of recommendations for adjacent services, whether it's title and escrow.
And even mortgage.
The typical client doesn't have a title or escrow person that they tend to go back back to.
And the aging of the trusted advisor there on the integration we're building an integrated platform, where the recommendation can go through the work flow through the platform index.
The title of experience of mortgage peers can go through the that's the real advantage of.
Other brokerage firms have title escrow on mortgage, but it's just the United by a common legal entity its not as the United in the.
On a single pad.
<unk> of glass, it's 99 to one of one log in experience.
That's really the advantage.
We have over the market.
That's helpful color. Thank you so much.
Your next question comes from Daniel Adam with Loop capital markets.
Hi, good afternoon, and thanks for taking my question congratulations on the great quarter and your first earnings call as a public company.
But my first question is on interest rates to which while while they remain at historically low levels they have been.
Increasing recently.
Really to the true.
The yields.
And to the extent, we continue to see interest rates rise is there a level at which you would expect that to have an impact on on transaction volume.
Let me just give a little bit of the context.
That our business is.
Is more weighted towards the high end of our markets relative to the traditional income brokerage company and.
So we.
In the high end.
Theres less of use of mortgage and so yes.
Even as rates go up above a certain level that will have an impact, but it will not be impacted as much as some of our peers.
Secondly, interest rates are still at historic lows and the fed has said that they're going to keep rates low for two years and so we feel pretty.
The positive about the.
On the future ahead of us.
And one thing I might add to that if you look at our business historically.
As Robert said he's operated in a number of different rate environments, but the fact is what really that takes our growth has been our ability to continue to add agents to our platform and our ability to help them from their business once they're on our platform and so we are generally focused much more so on that as opposed to as opposed to the rate environment.
And as the determinant of our ability to part of the business.
Yeah.
Okay, Great that's super helpful.
And then secondly, so you guys grew total transactions by 67% of it in the first quarter considerably higher than the market, 14% growth rate I guess, the how sustainable do you think that level of share gain is not just this year, but.
Over the next two to three years.
Well the metric that we look at that we think is sort of the best measure of that is our transactions per average principal agent.
And if you look at the transactions per per principal agents in 2019 that number was about $12 eight.
We grew that number by about 30% of 16, seven and 2020 and then of course some of that.
That number.
39 per sand in the first quarter year over year. So we've been we've been really successful on in terms of being able to drive that going forward.
We believe that the combination of having the best the best agents on the best platform will continue to drive productivity and that productivity is what allows us to capture more share and when we see increases in net net type of transactions per average principal agent as evidence that the platform.
As the parking.
Our agents typically see a 19% growth in their transaction tier one tier two on our platform.
And they continue to see growth beyond that and as a reminder, that 19%. That's really an average that we've seen consistently over the course of the last five years, so we've seen that across cohorts across the market.
And the and that's certainly a factor in terms of helping our agents get more productive over time.
Compass, we are of SaaS with agent work flow and all.
Always look for opportunity Acs software to drive efficiencies for agents, we think that at least 50% of the time that an agent of spending now.
We can give that to them by just making our platform better.
And they can use that time to invest back in their business and that will in fact allows us to create more transactions and allow us to gain share over time.
Okay.
Okay, great. Thanks, again and congrats congratulations.
Thank you.
And the next question comes from the traveler Yang with Barclays.
Hi, Thanks for the questions.
The first you highlighted some new product rollout point of the business tracker as well as the recently completed <unk> acquisition.
The sort of round out the platform can you help us understand maybe the one or two areas, where you feel there is some need the continued until on functionality and dropped the plate for further acquisitions and then the second one just on glad you noted that it had non compensation how should we think about monetization for the revenue potential as you noted it is going to expand the other comps.
The statements nationwide.
Yeah. So on the two areas that I would say we were investing the most in to fill out the platform of one team functionality roll permission ing.
On this is adas or the center of the highly complex multi party transactions.
And they have teams there are agents on other side there are many of their own clients the.
There's a lot of work the requires rule permission ing.
And.
<unk> functionality over time.
One to extend the collaborative functionality to the title officer to the mortgage officer.
And so the that's a core part of the platform that we need to continue to invest in.
Secondly is we call agent brokerage workflow.
And more traditional words, it would be the transaction management.
And there are a lot of disclosure forms E signatures.
There are.
There are contracts, we will all need of flow through the system to create simplicity for all sides buyer seller agent as well as the compass employee team. So those are the two areas in terms of glide, yes. They currently serve non compass agents and.
We want to continue to extend the product too steep.
States across the country. The priority is focusing on bringing the best of the functionality to the compass platform. That's the priority, but we want to continue to serve the non compass agents that they have to date and we're committed to that.
As well as expanding into.
The two additional markets.
Great. Thank you.
And your next question comes from Brian Nowak with Morgan Stanley.
Hi, This is Alex Wang on for Brian. Thanks for taking the question two questions first I think you talked a little bit on the <unk>.
From our remarks around changing up the playbook.
It relates to some of the newer markets can you maybe provide some color on that.
It would be helpful to get a little bit context, how you think about sort of the payback period and over what time period for some newer markets.
And the second I think you also call it very very encouraging.
The metrics around the <unk>.
Weekly too.
Sort of daily to weekly users of sort of seven percentage points year over year, obviously I think in some parts of the workflow you're trying to save age of time, So may not be of direct read but are there any sort of areas. You would call out that are really driving that in terms of areas that agents are being more interactive with the.
The compass platform.
Sure So I'm happy to let to address the first one on the question around our expansion playbook.
So we have a presence today in 47 markets. The launch we launched three new major markets and the first quarter.
And we actually launched another three in the in the fourth quarter.
And we've got a lot of experience in terms of how to expand successfully and end markets across the country. We've had a lot of opportunity the refine that playbook.
And first and foremost we're focused on on using technology to allow us to launch more quickly in our in the.
New markets. So a really good example is we've accelerated our ability to ingest.
<unk> share of acquired in the market from the MLS day.
<unk> refined our virtual onboarding capabilities that allows us to essentially bring onboard agents onto our platform very very quickly.
We've got a strategy that is focused on.
Finding the most influential on the productive agents in the <unk>.
Market and bringing them onto the platform and and from there accelerating market share gains and delayed slightly really see in terms of our expansion playbook is.
His experience.
And so we really know and a variety of markets how to do that effectively I would say over the course fell last couple of quarters and going forward.
<unk> focused on.
On the expansion in the mid sized cities.
Tampa is a good example.
The Jacksonville, Florida is a good example, we already have operations.
<unk> fell in the Atlanta, and Austin, and so we're really looking to those markets as really good template in terms of how to successfully launch and grow these markets on the faster, we're able to grow market share in those markets the faster we get.
Profitability in the market.
And in terms of the product usage and what's driven the largest impact as we've had our weekly average usage growth five percentage points year over year daily active users increased nine percentage points year over year in the <unk>.
The U or W of use has gone up seven percentage points the biggest impact over the last year has been marketing center in CRM and the biggest impact I would expect over the next year will be.
The <unk> functionality and transaction management.
On the former marketing center CRM the.
The reason for that impact is it helps agents grow their business by.
As seen on top of mind with their sphere.
Helping someone buying cell of home is executing the business, but the the best.
The way to grow the business getting more clients is making sure that everyone on your sphere of influence.
When they think about buying or selling homes. They think of you and whenever they are of a friend, who thinks about buying or selling of whom they refer you.
And so CRM helped us they know who to reach out to and when to reach out and what to say and then marketing center.
It gives our agents of the power of being in professional designer in the palm of their hand for digital footprint, whether it's digital newsletters, social media, whether it's post cards brochures, even client give the entire program for staying in touch.
And Martin yourself of that give them the content to reach out to their sphere.
It helps them grow their sphere of influence at the top of mind as a result of getting more business on.
Going forward for the next year.
The way I would categorize <unk> functionality and transaction management is really executing more of the foundational work flow in the day to day job as opposed to generating business as more of the execution of of.
The business, particularly the business post finding the home right.
We've done a lot of work on the pre buying the home part, but theres a lot of work agents do that.
Frankly, the public doesn't fully see and appreciate it because even try to protect our clients from the work.
And.
And that's the workflow that we're that we're really going to empower and along with the team functionality and transaction management.
Great helpful.
And your final question comes from the Matt could you say with Compass point.
Hey, good afternoon, and congratulations on a strong quarter out of the gate.
Just a question on the commission line item.
Good to see the improvement of 80 basis points. There I was wondering if you could help us think about some of the puts and takes in that line item moving forward.
Between kind of geographic mix new agent adds.
Volume and then longer term.
Just wondering how you view the commission split line item as a lever to ship.
Your longer term margin targets. Thanks, so much.
Sure well we are.
Needless to say very pleased with the with the trend in the.
And the commissions and other line that improvement of 80 basis points is really going to see and it's starting to see and the trend in the fourth quarter of 2020.
The displays that are very nice step up.
And really it was the result of a few different things that you mentioned.
Yeah, we see improving margins of their agent cohorts mature and we're able to deliver more value for our agents. We expect for that to continue going forward. We've really focused our expansion on higher margin markets. We started doing that in earnest last year in 2020 will continue to.
The integrate that into our expansion strategy.
As I mentioned in my remarks, we are seeing a nascent recovery in New York City already in and that New York is one of our oldest markets that a nice lift in New York.
It should be.
For from margins.
Over over the foreseeable future.
And of course R. R.
Our move into adjacent services expansion of adjacent services will be helpful. There.
As the.
Also look to bring on more up and coming mid tier agents onto our platform. They tend to have more attractive economics that.
That will also support.
The good performance in that line.
So it's really all five of those things together that that come together to help us scale and drive improvements there.
I would expect to see over the next several years continued improvements and in the in that line.
This performance is on the first quarter, but it's certainly great to see.
I will now turn the conference back over to Kristin, Inc. O'brien for closing remarks.
Alright. Thank you all for listening to the context first quarter 2021 earnings call of please feel free to reach out if we can be further assistance. Thank you.
Ladies and gentlemen. This concludes today's conference call you may now disconnect.
Okay.
Okay.
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